RussNeft refused to comment on the situation only saying that it had not received documents officially removing it from the tender for the refinery, which belongs to Israel's state company Oil Refineries.
"The main reason for removing RussNeft from the tender was its close connections with Arab countries," the source said.
Company president Mikhail Gutseriyev said in May that RussNeft would register a joint venture in Algeria in June to bid for the development of Algerian oil deposits. He also said that RussNeft was in partnership talks with some Algerian companies but did not give their names, adding that his company intended to bid for one large or two small oil fields in Algeria.
The source said the Israeli decision might have also been influenced by Russia's relations with Arab countries, a March visit made by a delegation from radical Palestinian political party Hamas and weapons supplies to Algeria.
RussNeft is a vertically integrated oil holding company, and is among the country's top 10 oil producers. Its recoverable oil reserves exceed 630 million metric tons (12.6 million bbl/d).
