CEO: Deal With Rosneft is U.S. Sanctions-Compliant

India and Russia signed billions of dollars of defense and energy deals on Saturday at a summit that sought to inject new life into a relationship that has been tested by shifting global alliances and conflict in the Middle East.

Under the biggest agreement, a group led by Russian state oil major Rosneft said it would pay $12.9 billion for a controlling stake in both India's Essar Oil and port facilities that it owns.

The sale does not run foul of U.S. sanctions imposed against the majority state-owned Russian energy firm, parent Essar Group's CEO said on Sunday.

The sale, which was signed on Saturday, is the biggest foreign acquisition ever in India and Russia's largest outbound deal.

The deal that will give Rosneft, commodities trading house Trafigura and private investment group United Capital Partners a 98 percent stake in Essar's oil arm is "US-sanctions compliant," said Essar Group's chief executive, Prashant Ruia.

He said the deal did not violate the economic sanctions imposed by the U.S. government on Russian entities over Russia's role in the Ukraine crisis. "The way it is structured, it is fully compliant. We are well within the rules that govern Russian companies."

Essar, controlled by the billionaire Ruia brothers, has interests in oil and gas, steel, ports and power, and has been under pressure from its lenders to reduce debts.

"It was an emotional decision; it was a very tough decision. It was difficult decision for people involved in the company and those who were involved in the business and building it," said Ruia in an interview on Sunday.

"We felt, all in all, we were getting attractive valuations, and we decided to sell."

Igor Sechin, CEO of Rosneft, said: “This is a significant milestone for the company. Rosneft is entering one of the most promising and fast-growing world markets. At the same time, this project provides unique opportunities for synergies with the existing assets of the Company and is consistent with Rosneft's enhanced presence in the fast growing markets of other APR countries, such as Indonesia, Vietnam and The Philippines.”

Essar plans to use proceeds from the sale to offset some 50 percent of the debt on its group companies after the deal is completed. Ruia said the parent company's debt would be cut by some $5 billion and a further $5 billion would go toward trimming debt at the operating company level.

Some of the proceeds from the transaction will be pumped into existing businesses, said Ruia, adding that the group does not have any plans to sell any of its other businesses in the future or any plans to de-list them to gain more control.

Debt-laden Essar Steel, which owns a 10 million ton steel plant in the western state Gujarat, carries debt of over $5 billion and had been seeking to restructure its debt.

Ruia said Essar is working closely with the banks to work out a restructuring plan and some of the funds raised via the sale of Essar Oil would go into restructuring the operations of Essar Steel.

The refinery deal follows a string of upstream investments in Russia by Indian companies in recent months that, Modi said, were worth $5.5 billion.

The defense pacts will also deepen military ties between the two countries that dates back to the Soviet era, when India entirely depended on Moscow to equip its armed forces. The United States has since taken over as India's top arms supplier.