Russian oil’s high roller keeps low profile

Luke Harding

For much of his career Igor Sechin, a former Soviet spy and close ally of Russian President Vladimir Putin, has been a man in the shadows. During Putin's first presidential stint, the joke doing the rounds in Moscow was that Sechin did not actually exist: instead, United States diplomats mischievously suggested, he was a sort of urban myth, a bogeyman invented by the Kremlin to instil fear.

But Sechin, chairperson of Rosneft, the state-owned oil company, has taken another step away from the dark. He has offered a deal that would entail Rosneft acquiring BP's stake in its troubled Russian joint venture TNK-BP, with BP in return acquiring 10% to 20% of Rosneft.

The Russian company has reportedly offered BP $28-billion in shares and cash. Sechin has overseen the deal himself: he flew from Moscow to London last Wednesday night.

The tie-up would mean Rosneft leaping from its near obscurity of just more than a decade ago to being the world's biggest publicly traded oil company — an extraordinary rise.

During Putin's first two presidential terms, Sechin was Putin's deputy chief of staff. In 2008 Dmitry Medvedev, Putin's temporary successor, made Sechin deputy prime minister.

Many were surprised that when Putin returned to the Kremlin in May, he failed to offer Sechin a government job. But Sechin's official positions in Russia's hierarchy understate his real influence. During the Putin era it has been Sechin running Russia's energy sector and until 2008 he operated largely from behind the scenes.

His power flows from his perceived closeness to Putin. Not only are they friends with a common KGB heritage, but, according to leaked US diplomatic cables, they share "economic interests".

Sechin is widely regarded to be the head of the Kremlin's siloviki (literally "force structures," used to describe politicians from the security or military services), made up of nationalist hardliners with a security or military background. He is a proponent of strong state control, especially in the energy sector.

The siloviki are at odds with a modernising camp inside the Kremlin, some analysts suggest, who favour greater economic liberalisation and Russia's integration with the West.

Putin, meanwhile, plays the role of intra-elite arbiter, balancing the interests of both factions. Others, however, dismiss this as rubbish. They say the internecine struggles inside the Kremlin are not about political philosophy or ideology, but merely battles between rival clans trying to divide up the spoils. (In Russia, the spoils amount to billions of dollars.)

Sechin often has been seen as a competitor to the moderate Medvedev among Russia's ruling elite. More realistic, however, is the scathing view that Medvedev was only ever the "number three guy" — behind Putin and Sechin in terms of power and influence.

To his enemies, Sechin is a malevolent figure, a Kremlin grey cardinal crossed with the Big Bad Wolf. The charge list against him goes something like this: it was Sechin who personally engineered the demise of the oil firm Yukos in 2003 and the jailing of its billionaire owner, Mikhail Khodorkovsky (Rosneft promptly swallowed Yukos's assets; Khodorkovsky is still in jail.) Sechin also led the siloviki's opposition to foreign investment in Russia, especially in oil and gas.

And there are suspicions that it was Sechin who directed oil exports towards the murky Swiss-based oil trader Gunvor while sidelining other customers.

But there are pluses too. In 2009 John Beyrle, then US ambassador in Moscow, listed some of Sechin's achievements. He had, the ambassador wrote, "unquestionably transformed Russia's most dismal oil company into a globally competitive state champion … he also protected Rosneft from a putative merger with Gazprom in apparent contradiction of Putin's desires".

The ambassador cited further examples of Sechin's "enlightened management": he had listened to minority shareholders, unusual in Russia; he had hired an American as Rosneft's chief financial officer. (Diplomatic cables reveal, though, that the US government has had "virtually no interaction" with Sechin.)

It is too early to establish just what the BP-Rosneft deal means. But Sechin appears to have recognised that Rosneft can only become a big global champion through international investment and expertise. Russia is still the world's largest producer and exporter of hydrocarbons. But its energy sector has stood still for some time and may even be sliding back: oil production is stagnant, there is underinvestment in exploration and production and heavy-handed state control. In common with other suspected ex-KGB officers, Sechin's biography is something of a mystery. Putin famously spent the 1980s as a KGB liaison officer in communist East Germany and Dresden; Sechin, a languages graduate of Leningrad State University, was stationed in Mozambique. After the collapse of the Soviet Union he worked in the St Petersburg mayoral office. When Putin became first deputy mayor, Sechin became his chief of staff in 1994; he has been at his side ever since.

Putin is set to stay in the Kremlin till 2018, possibly 2024. Sechin, then, will remain at the summit of Russian oil power for some years to come. — © Guardian News & Media 2012

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