Indian sources reported that due to financial meltdown Rosneft is not able to arrange funds to buy a stake in Imperial Energy
An Indian government official confirmed that Rosneft was now not keen on participating.
At the same time, Rosneft has said in the past that it was not interested in a stake in Imperial but analysts and sources close to Imperial have maintained it was interested.
Company spokesman Nikolai Manvelov on Monday said, "We have never said that we are interested in Imperial Energy."
Rosneft's finance chief recently said he expected a tough fourth quarter and hoped state aid would help it refinance its massive foreign debts.
Oil and Natural Gas Corporation reluctantly went ahead with its high-priced bid for Imperial last week after losing its appeal to delay the process.
It has already made an offer to Imperial shareholders to acquire their holdings at bid price of 1,250 pence.
Imperial management has strongly recommended that shareholders accept the offer "as soon as possible."