Posted on 02/02/2006 5:35:30 AM PST by Lukasz
The emergence of new oil companies suggests that the present ruling team in Russia is taking ownership of economic assets
In recent years, thriving new private-owned oil companies have emerged in the Russian energy sector. We know of the existence of two of them: Russneft and the North-West Oil Group (also known by its Russian acronym SZNG). Indirect evidence suggests that the success of these companies may be because President Putin's team has been granted property rights to them. Putin's people came to power after the principal share of state property had already been divided as a result of the 1990s privatisations. The present process whereby private fortunes are being accumulated to a great extent requires a new redistribution of economic assets.
New private oil companies
The fact of Russneft and the North-West Oil Group's dynamic development became apparent on the occasion of a tender for 49 percent of shares in Slovakia's oil transport enterprise, Transpetrol. Both of the Russian companies made competing bids for the Slovak company. The manner in which the two businesses were established, as well as their sources of financing, are unclear. Both started as intermediaries trading oil, both in Russia and abroad. They built up their present position by taking over small and usually disputable assets in the Russian oil sector. Russneft, registered in 2002, is owned entirely by Mikhail Gutseriyev and his relatives. In 2005 the company produced more than 17 million tons of oil, thus establishing itself among the top ten oil companies in the Russian Federation. As for SZNG, all that is known is that the company was incorporated in 2004 and has ambitious plans, but its ownership structure and economic results are still unknown.
Businesses and the ruling elite
The emergence and dynamic development of new privately-owned oil companies would not have been possible without the Kremlin's knowledge and approval. The present power elite is particularly interested in the energy sector, as it has demonstrated in recent years by bringing the most important gas and oil establishments under state control; this has compelled the remaining private companies to be loyal, and restricted foreign investors' access to the sector. The connections between Russneft and SZNG on the one hand, and the ruling elite on the other, have been noted by the press, although they are usually only sporadically mentioned. For example, the Russian media have established a link between Gutseriyev, the head of Russneft, and numerous economic scandals in Russia; interestingly, however, he has never been brought to account for any of these. On the other hand, his services to the country have been appreciated, and Gutseriyev has been awarded many medals and state distinctions (including for his participation in special operations). In addition, Russneft has benefited from the UN's Oil for Food programme for Iraq. In a report by CIA advisor Charles Dolfer, it was claimed that Saddam Hussein had granted Gutseriyev quotas for the export of nearly 12 million tons of Iraqi oil. Knowledge of the links between SZNG and the government is limited to the fact that the company has been working closely with Gazprom and other Russian oil companies, as it revealed in a paid announcement published in the Russian press in which it thanked these companies for their contribution to SZNG's success. In addition, the CEO Ernest Malyshev boasted that his company had played a role in the reconstruction of St. Petersburg before the celebration of the city's 300th anniversary. Particularly impressive amounts were spent on modernising the palace compound in Strelno near St. Petersburg, where the Russian President's residence is located.
Conclusions
One possible interpretation of the new companies' successes in the oil sector is that it is the current political elite amassing economic assets. Most of Putin's people, who came to power with him in 2000, did not have any economic base of their own. The greater portion of state property had already been divided up in the 1990s. Initially, Putin's team profited from managing state property. The present process suggests that this group is proceeding to the next stage of 'getting rich' -developing its own business base. In addition to the new oil companies, RosUkrEnergo may serve as a further example of this kind of activity - this gas trade intermediary consolidated its market position in the aftermath of the Russian-Ukrainian gas dispute, and co-operates with Gazprom. Building private fortunes using political power is hardly a novelty in Russia. The Russian state leadership acquired business possessions in a particularly dynamic manner in the 1990s. Interestingly, however, the present team came to power claiming that state interests were superior to private interests, that it was necessary to develop state capitalism, that the state needed to take control of the most profitable sectors of the economy, and that it had to eliminate those intermediaries who had been stealing the state's profits. If the above interpretation of the emergence of new oil companies is correct, as the 2008 presidential election approaches, we should expect more private companies to arise, both in the energy sector and elsewhere. However, as most assets in Russia have already been divided, this process is unlikely to be smooth. Various interest groups will compete for the assets available, and new fortunes will develop at the expense of existing empires.
Appendix
The owners of Russneft revealed its shareholding structure in late 2005, as they prepared the company's initial public offering. They disclosed that 70 percent of shares belonged to Mikhail Gutseriyev, and the remaining 30 percent to his relatives. Within just over 3 years, the company managed to acquire over thirty small production companies, three refineries and a chain of petrol stations. In 2005 its production increased from 10 million tons of oil (2004) to 17 million tons. This was possible because the company had taken over new fields. Russneft plans to continue the rapid expansion of its production. As Gutseriyev was starting up the present business, he co-operated closely with the Swiss-registered Glencore, an intermediary company trading oil and oil products (it controls about 3% of world oil trade) and metallurgic products. Russneft was initially built on assets (oil fields, chemical plants) taken over from the Russian-Belarusian company Slavneft, of which Gutseriyev was head until 2003. Russneft has also benefited from the collapse of Yukos, as it took over that company's smaller assets, including its contract with Hungary's MOL for oil production in the Zapadno-Malobalykskoye field.
As for North-West Oil Group (SZNG), it is known that during the year and a half of its existence, the company managed to gain direct access to Russian fields (it holds six production licences) and to establish itself in the sectors of oil processing and trade in oil and oil products. SZNG has also reported that it is working with Hungary's MOL (a company called SZNG-MOL was created to bring online the Surgut-7 field in Russia, which had been taken over from Yukos). An SZNG daughter company, called North-West Oil Company S.A., is registered in Geneva; its task is to intensify co-operation with foreign partners (mostly in terms of the sale of oil and oil products).
So actually wouldn't you want to take any reports from that organization with the same grain of salt one would take with any state-sponsored media? I mean, you can't have it both ways.
Could you put it a bit more simple (sorry, my English).
Pretend you are a decision maker in your government and you are responsible for dealing with Russian affairs. Would you want one-sided slanted information filled with nationalistic rhetoric reported to you, or would you rather want to know the whole picture - how the Russians think, why they react the way they do, what they expect, what they are aiming for?
That's the point, see my #34
Romani,
Oil plunged again today. A few more days like this and Putie will lose half his margins.
Cash those checks quick.
So when are you going to get going on those "legal channels"?
Well, I can't argue with your #34. Perhaps you should explain to REactor, spanalot, etc., that having information contrary to press reports does not necessarily mean someone is advocating a position, but rather reporting the facts as they know them.
.) Why do you use "Zavtra" and "Zavtra" journalists in your rebuttals to people?
2.) Do you endorse "Zavtra" or will you condemn it?
3.) In which country's army did you serve?
4.) If you were eligible to serve in our great nation's military, why didn't you?
5.) At which GULag were your parents held?
6.) Under what article where they held?
7.) Do you renounce the anti-Semitism, Anti-Americanism, and Anti-Capitalism that your source, "Zavtra" publishes on a daily basis?
I think Ronald Reagan really did beat Soviet Communism. I'm also pretty sure that the Polish FReepers you vilify don't really think that they still live under communism today. Did your tovarischi you pinged tell you I subscribe to those theories? They're liars.
So are there any more words you want to falsely put in my mouth? Any other false accusations for me to dismiss?
Your lies ring shallow - I would rather talk about your silly threat that you emailed me:
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Paperwork
From Romanov | 01/31/2006 9:53:17 PM EST new
Spanalot,
I've warned you before. That's the last time. Expect to be hearing from me via legal channels.
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Do you propose taking my 2nd amendment rights next - perhaps you will get lioninwinter with his big gun to enforce your pogrom?
.) Why do you use "Zavtra" and "Zavtra" journalists in your rebuttals to people?
2.) Do you endorse "Zavtra" or will you condemn it?
3.) In which country's army did you serve?
4.) If you were eligible to serve in our great nation's military, why didn't you?
5.) At which GULag were your parents held?
6.) Under what article where they held?
7.) Do you renounce the anti-Semitism, Anti-Americanism, and Anti-Capitalism that your source, "Zavtra" publishes on a daily basis?
Pro-Putin Neo-oligarchies?
Ahh, nothing stopping those Polish "neutral" anti-Russian "think" tanks. Oh wow, and its government sponsored....no way!
ping
Yes, many men have used those words....including some "real" nice ones in the last century.
Libel and slander are not protected by the 1st Amendment and the second has nothing to do with this conversation. But you were to busy growing up in a Gulag (which one was that?) reading the Communist paper Zavtra, to know that.
Spanky's response to your post says it all...a foreign troll, period.
I know that commie criminals (Stalin, Bierut, Chrushchov, Jaruzelski - to mention only a few) overused this expression in the past but I just try to act like Vladimir Putin who used very similar phrase still in this century. And you must say that he is real nice guy. I hope you won't call me names for saying that :)
No wonder. Russia is an Eastern European country also. Get used to.
Oil is plunging again - better get the resume ready. Putie's going bankrupt soon.
http://www.bloomberg.com/markets/commodities/energyprices.html
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