Top Kremlin Official Becomes Rosneft’s Board Chairman

Publication: Eurasia Daily Monitor Volume: 1 Issue: 61

In what could be a further indication that the Kremlin plans to seize back the commanding heights of Russia’s economy — i.e., the energy sector — the state-owned Rosneft oil company announced on July 27 that its board of directors had elected deputy presidential administration chief Igor Sechin as its chairman. According to some observers, the emergence of Sechin, a long-time close associate of President Vladimir Putin and a fellow security services veteran, as Rosneft’s helmsman gives a strong hint as to who will end up controlling the assets of the embattled oil giant Yukos.

Rosneft’s press service reported that Sechin had been elected chairman of its board of directors and that Sergei Oganesyan, head of the Federal Energy Agency, and Yuri Medvedev, deputy head of the Federal Agency for Management of Federal Property, were elected as Sechin’s deputies. Rosneft’s board of directors includes other high-ranking government and Kremlin officials and Rosneft’s president, Sergei Bogdanchikov. One newspaper quoted an anonymous government official as saying that Sechin and Bogdanchikov have “good personal relations” (Vedomosti, July 28).

Word of Sechin’s entry into the oil business is particularly interesting in light of the Justice Ministry’s recent announcement that the state intends to sell off Yukos Oil’s main production facility, Yuganskneftegaz, in order to collect on the $3.4 billion that the Tax Ministry says Yukos owes in back taxes for 2000. Following the Justice Ministry’s announcement, most analysts speculated that Yuganskneftegaz would wind up in the hands of either Rosneft or Gazprom, both of which are state-controlled, or Surgutneftegaz, an oil company said to have close relations with the Kremlin. Representatives of Rosneft and Gazprom, however, insisted their companies would not be bidding for Yuganskneftegaz (see EDM, July 21, 23, 26).

Be that as it may, Sechin is reported to be the driving force inside the Kremlin pushing for a hard line vis-a-vis Yukos. Back in May, Yelena Dikun of Moskovskie novosti reported that Sechin, along with fellow Kremlin official and KGB veteran Viktor Ivanov, Federal Security Service (FSB) Director Nikolai Patrushev, and Prosecutor General Vladimir Ustinov, were pushing for a hard line toward Yukos as part of a wider plan to “reshape the market and also strengthen state control, along with their own influence.” Dikun reported that these siloviki wanted to redistribute Yukos’ assets to Rosneft and Akron, a company headed by the “chemical oligarch” Vyacheslav Kantor. Reportedly, Kantor “regularly supplied the presidential administration with analytical memoranda about an anti-state conspiracy [on the part of] Khodorkovsky and his team,” Dikun wrote, adding that these memoranda were supplemented by reports that Khodorkovsky engaged in “subversive activities against the president” during his visit to the United States during the summer of 2003. “There is information that Rosneft has already put together a team of top-managers that is just waiting for a signal to replace the leadership of Yukos, which is in jail and abroad,” Dikun reported (Moskovskie novosti, May 21).

Earlier this month, Stanislav Belkovsky, who heads the Kremlin-connected National Strategy Institute, said that Igor Sechin intended to become the head of a new state energy holding to be built on the foundation of Rosneft and Gazprom. According to Belkovsky, the entity would take over “approximately half” the assets held by Yukos but not force the embattled oil company into bankruptcy, thereby leaving intact the promise President Putin made in June that the government would do everything it could to prevent Yukos’ bankruptcy. Belkovsky at the time predicted that Sechin would become chairman of Rosneft’s board of directors (APN, July 5).

Sechin’s accession as Rosneft board chairman has given credibility to the earlier speculation about his alleged leading role in the campaign against Yukos. Vedomosti reported on July 28 that Sechin has been insisting that Yukos be “sold off piecemeal” ever since Yukos CEO Mikhail Khodorkovsky was arrested last year and the company came under pressure to pay billions of dollars in back taxes. Kommersant, for its part, stressed that the moves against Yukos are part of an overall strategy to revive the idea first initiated in the mid-1990s of creating Gosneft, a large state fuel and energy holding that would “completely control the export of oil from Russia and define the rules of the game on the internal market.” According to the newspaper, Sechin will be the president of Gosneft, which will also absorb Evrofinance bank, an erstwhile subsidiary of Russia’s Central Bank that is now held by state-controlled companies, and Gazprom-Media, the media arm of the state-controlled natural gas monopoly that controls NTV television (Kommersant, July 28).

Earlier this month, the Telegraph reported that Sechin had masterminded a plan under which Yukos’ oil would be diverted to “a Kremlin insider and oil trader,” Gennady Timchenko, as it is pumped through the country’s pipelines, which are controlled by the state company Transneft. Citing “a member of the Russian security service,” the British newspaper reported that Timchenko, like Putin and Sechin, has a KGB background and is “very close” to the Russian president. “Timchenko was an oil trader at the main St. Petersburg refinery when Putin was vice mayor of the city and has for years been handling ‘external relations’ for many of Russia’s business groups,” the Telegraph reported. “He now has his company offices in Geneva.” According to the newspaper, Timchenko is also close to Rosneft and is a shareholder in Surgutneftegaz (Telegraph, July 11). It should be noted that the scenario put forward by the Telegraph and those reported in the Russian press concerning Sechin’s plans to become the head of a large state fuel-energy holding are by no means mutually exclusive.