* U.S. regulators refused to clear deal, says Rosneft
* Morgan Stanley says will consider a variety of options
* Deal valued by sources at $300 mln to $400 mln
* Rosneft shares closed up 2.5 percent (Writes through, adds portfolio manager comment)
By Vladimir Soldatkin
MOSCOW, Dec 22 (Reuters) - The ambitions ofKremlin-controlled oil champion Rosneft to boost itsglobal reach have been reined in by U.S. authorities, whichtorpedoed its acquisition of a Morgan Stanley oil tradingbusiness.
Rosneft, headed by Igor Sechin, a long-standing ally ofRussian President Vladimir Putin, said on Monday that the dealwas terminated because of the refusal by U.S. regulators togrant clearance.
"Having invested substantial efforts in the deal, theparties regret that it could not be completed," said Rosneft, inwhich BP holds a 20 percent stake.
Morgan Stanley also said that the deal was terminated andthat it will now consider a variety of options.
The collapse of the deal, valued by sources at between $300million and $400 million, is yet another blow for Rosneft afterits partners, including ExxonMobil, withdrew fromprojects to develop Arctic offshore oil deposits following theintroduction of Western sanctions over the Ukraine crisis.
The Morgan Stanley deal was agreed in December 2013, whenSechin said that it would spearhead the company's growth in theinternational oil and products markets.
Since then, however, the West's sanctions and a plummetingoil price has prompted Rosneft to seek state support fromRussia's National Wealth Fund (NWF).
The strained relations with the West have already forcedGerman chemicals group BASF and Russia's Gazprom Sources told Reuters in September that Rosneft might abandonthe Morgan Stanley deal because sanctions had hurt its abilityto finance the operations. The fall in its share price and the rouble's collapse haveleft Rosneft with a market capitalisation of $31 billion,against $45 billion of debt that was mainly incurred with lastyear's purchase of oil producer TNK-BP. Rosneft shares rose as much as 7 percent in Moscow trading,with investors encouraged by the end of the company's spendingspree. The shares finished the day with a gain of 2.5 percent,against a 0.8 percent decline for the broader market. "Of course, it's not bad that Rosneft has stopped, at leasthere. If one has to buy something in such a difficult situation,one would not only have to ask for help from NWF but also fromthe riches of the entire motherland," Kapital portfolio managerVadim Bit-Avragim said. Earlier in the day, the company said it had met a $7 billionloan repayment, partially easing fears among investors thatWestern sanctions could prompt mass defaults. (Additional reporting by Zlata Garasyuta and Katya Golubkova inMoscow and Lauren LaCapra in New York; Editing by Thomas Grove,Jane Merriman and David Goodman)
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