Chinese conglomerate CEFC had already started paying for a stake in Russian oil giant Rosneft when the economic crime police took its chairman Ye Jianming away, halting the $9.1 billion deal in its tracks, according to three sources close to the matter.
The fate of the deal, one of the largest Chinese investments in Russia, has become a litmus test of how far President Xi Jinping's government is prepared to go with a crackdown on financially risky activities among big-spending conglomerates.
The acquisition of the stake in Russian state oil firm is seen as strengthening relations between Russia and China, the world's top energy exporter and top energy consumer.
CEFC China Energy was buying the 14.16 stake from a consortium including Swiss trader Glencore. It had transferred the first tranche of payment before it ceased all communications, the sources told Reuters.
The sources declined to say how much had been paid. One said the fact some money has changed hands would make it more difficult for any party to back out of the deal.
CEFC founder and chairman Ye was put under investigation by Chinese authorities over suspected economic crimes, Reuters reported at the beginning of March, and he will step down from his position at the firm.
Rosneft representatives have since travelled to China but failed to get any update from CEFC on the stake acquisition deal, according to the sources.
"The other party (CEFC) has just vanished," one source said.
Rosneft and Glencore declined to comment, while CEFC did not respond to a Reuters request for comment.
Another of the sources said it was difficult to predict how the deal would unfold. "One thing is clear though. The Kremlin wants China to own a stake in Rosneft. And China has long said it wants to boost Russian energy ties," he added.
The Kremlin, the Chinese foreign ministry and the Chinese national development and reform commission, a state economic management agency, did not immediately respond to requests for comment.
Rapid Growth
The investigation into Ye, who founded CEFC in 2002, followed mounting concerns among Chinese authorities about the finances and opaque ownership of the Shanghai-based private firm which has grown from a niche fuel trader into an oil and finance conglomerate with assets across the world.
An investment firm owned by the Shanghai government has been tasked with evaluating CEFC's financial position as part of a restructuring and takeover process.
State-controlled China Huarong Asset Management Co has taken a 36.2-percent stake in CEFC Hainan International, the unit that is acquiring the Rosneft stake.
Complications to the deal could prove a blow for Rosneft boss Igor Sechin, a close ally of Russian President Vladimir Putin. Sechin is keen to attract new foreign investment as a way of showing the Kremlin oil producer is not crumbling under the pressure of Western sanctions but is growing.
In 2016, Sechin clinched a deal with Glencore and Qatar's state fund QIA to sell 19.5 percent in Rosneft for 10.2 billion euros. Qatar contributed 2.5 billion euros with the rest mainly coming from Russian banks.
Less than nine months later, CEFC agreed to buy out the majority of the stake with QIA keeping its stake intact at around 5 percent, equal to its initial contribution.
By Dmitry Zhdannikov, Additional reporting by Vladimir Soldatkin and Aizhu Chen