Germany set to approve sale of oil company to Russians E-mail Tweet Facebook Google Plus Linkedin Share icons by Geoffrey Smith @FortuneMagazine August 22, 2014, 7:57 AM EDT Berlin is set to approve the sale of one of Germany’s largest oil producers to a Russian consortium, in a move that may undercut U.S. and E.U. sanctions aimed at punishing Russia for its role in stoking the conflict in Ukraine. Reuters cited people familiar with the situation Friday as saying that the Federal Economy Ministry was prepared to wave through a deal under which RWE AG, the country’s second-biggest utility group, would sell its oil and gas-producing subsidiary DEA to the LetterOne (L1) consortium led by the oligarchs Mikhail Fridman and German Khan. “The approval is on the table,” Reuters quoted one official as saying. The deal is controversial because DEA has expertise in offshore oil and gas production, developed over years of operating in the North Sea and Egypt. The U.S. and E.U. last month banned companies from selling technology in this field to Russian companies, aiming to crimp the development of offshore oil deposits that will be crucial to keeping Russia’s output up in years to come, as existing fields in Siberia get depleted. The two companies agreed the €5 billion ($6.75 billion) deal in March, before the sanctions were imposed. It has already received approval from the European Commission’s antitrust regulators. RWE, whose main business is selling electricity, gas and water to German consumers, badly needs the money to cut a €31 billion debt mountain. Like its rival E.On SE EONGY , it has been badly hit by Germany’s plans to exit nuclear power and by its generous subsidies for renewable power. It posted its first loss in over 60 years last year, and its shares have fallen by over two-thirds since 2007. Fridman and Khan are two of the richest businessmen in Russia, having sold their stakes in oil company TNK-BP to national champion OAO Rosneft last year for around $14 billion. That made Rosneft the world’s biggest publicly-traded oil producer, responsible for over 4% of global crude oil supply. Although not part of the security-service clique around President Vladimir Putin that has been the primary target of western sanctions, they have acquired huge influence over the years by virtue of their wealth. For them, the deal not only puts some of the TNK proceeds to work, but also puts them in possession of technology that Rosneft, and the Russian state, will need if it is to keep pumping enough oil to pay for future budget spending. Neither the German Economy Ministry nor LetterOne replied to requests for comment immediately Friday. RWE said it was still examining the reports. Elsewhere Friday, Rosneft was itself taking measures to get its hands on offshore technology, buying a 30% stake in the Norwegian drilling company North Atlantic Drilling Ltd. NADL will buy “a significant portion” of Rosneft’s drilling fleet onshore in Russia in return, the company said in a statement. Like the DEA deal, this was also announced before the sanctions were widened to the Russian oil sector in in general. However, Rosneft has not had everything its own way recently. It has been banned from borrowing on U.S. and European capital markets as part of the West’s package of sanctions, and has had to rely increasingly on advance payment for its oil in order to maintain working capital. But the Financial Times reported Friday that a proposed $2 billion prepayment deal with oil trader Vitol, under discussion since March, had collapsed. Rosneft had last week asked the Russian government to plunder $42 billion from its sovereign wealth fund to help guarantee some of the massive debts it has racked up, mainly through buying TNK-BP for $55 billion.