The deal consolidates control of the nations base oil and finished lubricant sector. Rosneft is Russias second-largest finished lubricant producer and last year produced a combined 779,000 metric tons of base oils and finished lubes, while Bashneft produced 170,000 tons, according to Bashneft’s web site.

According to Russian news reports, some members of Vladamir Putins cabinet argued that the government should not sell its stake in Bashneft to another state-controlled oil company. Federal agency Rosneftegaz holds a 69 percent stake in Rosneft. The Economy Ministry has said it will sell a 19.5 percent stake in Rosneft by next month.

Bashneft is headquartered in Ufa, the capital of BashkortostanRepublic, and is a large crude oil producer, thanks to Bashkortostans rich reserves. The companys Novo-Ufa refinery includes an API Group I base oil plant with capacity of 220,000 tons per year and a lubricant blending plant. Moscow-based Rosneft markets lubricants through its RN-Lubricants unit. It also operates one 200,000 t/y Group I plant in Angarsk and another of the same size in Novo-Kuibyshev.

Once privately held, Bashneft was nationalized in 2014 in a process similar to the government takeover of Yukos but with less severe consequences for Bashnefts owners than ex-Yukos owner Mikhail Khodorkovsky, who was sentenced to more than 10 years in prison for embezzlement and money laundering convictions that some called politically motivated.

After the Bashneft nationalization, the Russian governments grand plan has been to sell it to a private investor, preferably domestic, to fill the tremendous budget gaps in an environment characterized by recession and a stagnated economy.

Igor Sechin, chief operating officer of Rosneft and an ally of President Vladimir Putin, jumped into the game, offering 330 billion rubles (U.S. $5.3 billion) for the governments stake. Its a price that no other Russian oil company, including Lukoil, has been willing to offer.