The Government Commission on Foreign Investments allowed Chinese Sinopec to acquire up to 20% of Sibur shares, said the head of the Federal Antimonopoly Service Igor Artemyev (his words were quoted by Interfax on Friday). The first 10% will cost Sinopec $1.338 billion, the price of the second part of the package has not yet been set. Sinopec has the right to buy this additional 10% within three years, Artemyev added.

The decision of the government commission is an important step to close the deal, but the deal has not yet been closed, so it is premature to talk about its possible conditions, a Sibur representative said.

The fact that Sinopec could become a co-owner of Sibur became known during the September visit of Russian President Vladimir Putin to China. The deal will strengthen the leading positions of the companies, Sibur said in a statement. Sinopec will buy approximately 10%, two people close to the negotiators told Vedomosti at the time. Sibur shareholders have always said that they are not interested in selling a stake of less than 10%, added one of the interlocutors. It is not clear which of them will sell the shares, but a person close to one of the parties previously told Vedomosti that none of the co-owners would part with the stake completely. Even if Sinopec eventually buys out the entire 20%, chairman of the board of directors Leonid Mikhelson will retain control over Sibur, Vedomosti’s source said on Sunday. Selling the stake in parts is a condition of Sinopec, which wants to make sure it does not overpay for the asset, says a person close to one of the participants in the negotiations.

Not the first day we've known each other

In 2014, Sibur sold a blocking stake in the Krasnoyarsk synthetic rubber plant to Sinopec, and then the holdings created a joint venture in China - a plant for the production of nitrile butadiene rubber.

Raiffeisen-bank analyst Konstantin Yuminov estimates the entire Sibur at $12–14 billion. Based on the figure mentioned by Artemyev, for the deal with Sinopec the entire Sibur is valued at $13.38 billion.

After the deal with Sinopec, the co-owners of Sibur will sign a shareholder agreement, a source close to one of the parties to the negotiations told Vedomosti. A 20% stake guarantees two seats on the board out of 10.

Sinopec is China's largest producer of oil, gas and petrochemical products. Thanks to falling commodity prices, Sinopec's petrochemicals unit ended the first nine months of this year with 15 billion yuan (about $2.3 billion at current rates) in operating profit versus a loss a year earlier, the company said in a presentation. It has a long-standing partnership with Sibur (see inset), but they are partly competitors: Sinopec sells liquefied petroleum gases in China (used as raw materials), which it has been supplying to China and Sibur since last year. The products of the Amur gas chemical complex, which Sibur plans to build using raw materials from the Power of Siberia, will also be oriented towards the Chinese market. But in the first half of 2015, Asia's contribution to Sibur's revenue was small - only about 9%.

It is very difficult to enter the Chinese market, states Sergei Sanakoev, president of the Russian-Chinese Analytical Center, and it is unlikely that Sinopec’s interests will include supporting Sibur in the Chinese market - especially in conditions when the Chinese economy is not growing so rapidly and internal competition is intensifying. But the Chinese company will be able to try to lobby its interests in the Russian market, the expert believes.

The representative of Gennady Timchenko (owner of 15.3% of Sibur) declined to comment; it was not possible to obtain comments from representatives of his partners - Mikhelson (50.2%) and Kirill Shamalov (21.3%). A Sinopec spokesman did not respond to questions.

Chinese Sinopec may buy up to 20% of Sibur