Putin’s Aides Expand Control of Companies

Analysis: Russian President Putin’s Aides Expand Control of Companies

As the end of President Vladimir Putin’s term in office approaches, Putin deputies and aides are accumulating more leadership posts in the economic sphere and expanding the companies they control, ensuring their economic wellbeing and a financial power base in the future. Existing giant state companies like Gazprom and Rosneft provide great resources, and more new state corporations are being created. Some leaders mentioned as possible successors to Putin – First Deputy Premiers Sergey Ivanov and Dmitriy Medvedev and Deputy Premier Sergey Naryshkin – may use the economic entities under their control to enhance their chances for succession; otherwise, they and others – such as Putin assistants Igor Sechin and Viktor Ivanov – may be able to remain influential through their economic posts even if they lose their government posts after Putin’s departure.

Most top Putin aides control significant assets. Medvedev is chairman of the board of Russia’s expanding natural gas monopoly Gazprom; Sechin is chairman of the board of Russia’s largest and most rapidly expanding oil company Rosneft; and Naryshkin, now sometimes mentioned as a possible successor, has become Sechin’s deputy at Rosneft. Meanwhile, Sergey Ivanov is board chairman of a new aircraft corporation and is setting up a nanotechnologies corporation and a shipbuilding corporation, while Viktor Ivanov, already board chairman of state airline Aeroflot and air defense systems company Almaz-Antey, is calling for creation of a state machine tool monopoly, which he presumably will head.

Some Russian media have pointed out that heading these big state companies may ensure Putin deputies a big financial base after Putin retires, whether or not they succeed to top posts such as president or premier.

  • Independent commentator Svetlana Samoylova in Politkom.ru wrote: “Vladimir Putin promises to quit the post of president in 2008, and this means his entourage risks losing state posts and becoming superfluous. Perhaps in this connection the need arises to expand their sphere of influence and create bases for work after 2008” (2 July).

  • Anti-government website Gazeta.ru asserted that “all the talk about energy empire or global energy security is merely a cover for a carve-up of mineral resources among conflicting Kremlin groupings” (18 June).

  • Commentator Nikolay Vardul in the daily Gazeta contended that the recent emergence of “new state corporations” to deal with issues ranging from innovations and nanotechnology to housing is linked to the election, as “the president is leaving and rewarding his team.” Noting that Sergey Ivanov is in charge of the Russian Nanotechnologies Corporation (Rosnanotekh) and the Development Corporation (Korporatsiya Razvitiya) and Medvedev heads the Foundation for Assisting Reform of Housing and the Municipal Complex, Vardul wrote that even if they do not become president or premier, they will lead the “main areas of the country’s development” and “wield huge financial powers” (5 July). Dmitriy Medvedev

First Deputy Premier and potential successor Medvedev conducted the 29 June Gazprom annual shareholders meeting and has been playing an important role in Gazprom’s expansion.

  • At the shareholders meeting, Medvedev bragged that Gazprom is the world leader in gas reserves and voiced hopes that Gazprom will become the world’s leading energy company (NTV, 29 June). Medvedev has repeatedly endorsed Gazprom’s ambitious expansion plans and argued that having Gazprom as big as possible strengthens Russia. (1)

  • Gazprom is currently pressing to take over the huge coal company Siberian Coal Energy Company (SUEK), the biggest supplier of coal to electricity giant YeES. With Gazprom itself already supplying over 65% of YeES’s gas (Kommersant.com, 18 June), YeES CEO Anatoliy Chubays and others have protested that this will give Gazprom monopoly control over electricity and over much of the coal industry, in addition to its monopoly in gas. Gazprom has recently increased its ownership in electricity companies, such as Mosenergo (Interfax, 9 June). (2) Medvedev has praised Gazprom’s takeover of SUEK (Interfax, 29 June).

  • Gazprom CEO Aleksey Miller in May proposed to the cabinet to transfer to Gazprom ownership of two big gas deposits bypassing any competitive bidding. (3) Medvedev on 25 May ordered ministries to study Miller’s request by July, and Premier Mikhail Fradkov appears ready to support it (Vedomosti,18 June). Others, including Russia’s natural resources minister, oppose Gazprom’s proposal as establishing “an absolute monopoly” on mineral resources in Siberia (Gazeta.ru, 18 June). Igor Sechin

Sechin, as Rosneft board chairman, conducted the 30 June annual Rosneft shareholders meeting, bragging of big expansion during 2006 and announcing plans to make Rosneft one of the world’s biggest oil companies.

  • State-financed daily Rossiyskaya Gazeta reported that Sechin declared Rosneft will soon become a global oil company and aims at “the most ambitious tasks possible” (2 July). Amplifying this, Rosneft President Sergey Bogdanchikov announced plans for it to become one of the world’s top three oil companies, and another Rosneft official at the meeting announced it should try to equal ExxonMobil, Shell, and BP (Rossiyskaya Gazeta, 2 July).

  • Rosneft has expanded greatly in recent months, and after winning control of most of Yukos’ assets recently, became Russia’s biggest oil company, surpassing Lukoil (Rossiyskaya Gazeta, 2 July; Politkom.ru, 7 May).

  • The independent daily Vedomosti, under the title “Sechin’s Debut,” played up Sechin’s role in running Rosneft. It wrote that belying his reputation as the “gray cardinal,” the “very secretive” Sechin ran the meeting in an unusually open fashion and made a good impression in what the paper called his first public speech (2 July). (4) Sergey Naryshkin

Naryshkin, recently raised to deputy premier and lately talked about as a possible candidate to succeed Putin (Moskovskiy Komsomolets, 18 June), was elected deputy chairman of Rosneft’s board of directors at the 30 June shareholders meeting (Rossiyskaya Gazeta, 2 July), providing him with an economic base like other potential successors. Sergey Ivanov

Ivanov as deputy premier and defense minister became head of a new state corporation for aircraft manufacturing in December 2006, and after his recent promotion to first deputy premier was put in charge of economic development strategy and announced plans to create more government corporations, some of which he may personally head.

  • Ivanov was elected chairman of the board of directors of the Amalgamated Aircraft Manufacturing Corporation at the first meeting of its board in December 2006 (RIA-Novosti, 12 December 2006).

  • In March, he announced a government decision to create an Amalgamated Shipbuilding Corporation modeled on the aircraft corporation (Voyenno-Promyshlennyy Kuryer, 14 March).

  • A state council for nanotechnology was set up in June with Sergey Ivanov as head (ITAR-TASS, 14 June) and with heads of some of Russia’s largest corporations as members, including Severstal, Yevraz, and Rosneft (Kommersant.com, 15 June). On 5 July, the Duma passed a law creating the Russian Nanotechnologies Corporation (Rosnanotekh) (Rossiyskaya Gazeta, 5 July).

  • The anti-government website Yezhednevnyy Zhurnal wrote that the state intends to create “major industrial holding companies – joint-stock companies in form but state corporations in content” – modeled after Gazprom, and that Sergey Ivanov laid out this strategy for aircraft building, shipbuilding, nuclear energy, spacecraft, nanotechnology, and communications in a major speech at a June economic forum (12 June). Viktor Ivanov

Media reported that Putin’s assistant in charge of personnel Viktor Ivanov has quietly proposed the creation of a new state monopoly for machine tool building, which may be added to the companies he already heads.

  • The daily Kommersant reported Ivanov sent Premier Fradkov a 19 May letter proposing to form a state monopoly on import and export of machine tools, based on the state’s Stankoimport. He asked that Stankoimport be dropped from the list of state companies slated for privatization in 2007. The website noted that Ivanov already chairs the boards of directors of Aeroflot and Almaz-Antey (27 June).

  • Svetlana Samoylova, under the title “Who Needs a New State Monopoly?,” speculated that Ivanov himself may head the new monopoly, continuing the trend of “influential figures in Putin’s entourage striving to acquire control over economic assets” (Politkom.ru, 2 July).

OSC [US Open Source Center]

July 11, 2007

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