BMB: “Sechin has wanted to carve up Gazprom for many years” – The Stanovaya interview, part 2

Interview published on the Bear Market Brief website on October 11th 2017.

Is Sechin’s recent behavior an example of the Russian elite getting more “aggressive”?

I’m not sure that “aggressive” is the right word in this context. The problem is Putin used to play the role of an arbitrator, but nowadays he doesn’t want to lose time dealing with internal conflicts. There are two situations where we can see that Putin stepped back, leading to a more chaotic situation.

The first situation is the Ulykuaev case, when the [now former] Economic minister was arrested and put under house arrest. Putin did not intervene in this story, and Sechin was by himself. It’s obvious that he lacked political support, and even the siloviki didn’t conduct the case the way Sechin would have wanted.

Second situation is the trial between Sechin and AFK Sistema – or, Rosneft and Sistema. The court made a decision in Rosneft’s favor, but Sistema is going to challenge this decision: it’s not a done deal, as Putin did not sanction Rosneft to swallow Sistema. Sechin acted on his own.

And that’s not only Sechin, there are a couple of actors who were put into a new situation where they have to act without Putin’s direct support, and it became harder for them to accumulate resources to push their interests.

When we talk of “resources,” it’s not only financial resources but first and foremost administrative and “force” resources, the ability to influence the courts or prosecutors, to work with the FSB. All this becomes harder when you don’t have Putin behind you. In this regard, yes we can say that many became more aggressive as they now have to invest more resources to reach their goals. It became harder to resolve conflictual situations, and also to protect oneself from those who have some sort of “corporate interest” in you.

Do you think that Sechin has a specific goal, an objective, in all this?

I think he knows what he wants, he understands his corporate interests very well and how to develop Rosneft. But if we look at his relation with the elite, his behaviour is, in my view, more irrational. And I don’t think he has a specific plan.

In all the conflicts that we witnessed, with Ulyukayev, with Sistema, there’s an emotional factor. For Ulyukayev for example, Sechin was extremely irritated by the refusal of the government to support the purchase of Bashneft. He sincerely believed that Rosneft was the only appropriate buyer for Bashneft. And those who are against this, from his point of view, are not just against the interest of Rosneft, but against the interest of Russia as a whole. He sincerely believes that. And so, when Ulyukayev in August said that Rosneft was not the right buyer for Bashneft, Sechin blew up. I don’t think that Sechin necessarily wanted to send a minister to prison for 20 years. He wanted to “expose”, to show that, look, we have a government that doesn’t know the interests of Russia and of the corporations that make up Russia’s budget. He especially wanted to show that the liberals in the government could not carry out policies that would advance the country’s interests.

It’s a similar story with Sistema and Bashneft: for many years Sechin fought to bring Bashneft back into state hands. It all started during Putin’s second mandate, even during the first mandate, it’s a very long story between the authorities in the Bashkortostan region and the Kremlin. And from the start, Sechin saw it as unfair that Bashneft would come under the control of AFK Sistema. And when the opportunity came he simply reignited the issue to try and solve this perceived unfairness. It’s all very emotional.

However, when it comes to Gazprom, there is a strategy. Rosneft has real ambitions in the gas sector and Sechin would like to see Gazprom carved up in several components, an extraction component, a transport component… so that Rosneft can have more opportunities to export gas without entering into a conflict about monopolies. But here Putin is very much opposed to dividing Gazprom; he has a very strong position on this. In 2012 Sechin raised the issue of getting rid of Gazprom’s monopoly, but he could not do anything about this. Putin said that it would not happen.

But he’d like to.

Yes, he has wanted that for many years.

There’s something of a world between Sechin and Miller. One has a huge presence in discussions about Russia, in the press and among Russia watchers generally, while the other… not so much.

I think this has a lot to do with personal factors. Miller has always been a weak figure in Gazprom. Miller doesn’t have political objectives, he isn’t engaged in a struggle for power, and he’s more interested in corporate matters. He’s not… dynamic. Compared to Sechin, he does not perceive his work as a personal mission.

Moreover, Gazprom has always been perceived as an instrument of foreign policy, a mechanism of influence on other countries, and Miller didn’t see Gazprom as a global corporation that needs to be developed, business-wise. With Sechin, the business component is much more significant.

Moreover, Miller leads an organisation with a lot of internal clans, it’s a monster with diverse interests and Miller doesn’t have a single “vertical” to control everything. In contrast, almost all of Rosneft basically falls under Sechin. There is the board of directors with different interests of course, but Rosneft itself, from an operational point of view, is absolutely Sechin’s company.

Can we say that under Sechin, Rosneft has become more “independent” than Gazprom?

Yes. But on the other hand, Rosneft doesn’t play the same role as Gazprom in foreign policy. If tomorrow, or today, or yesterday, we [were to] have a conflict with neighbouring countries, it’s the gas lever that will be put to use, not the oil one. Sechin matters only from the point of view of taxes. And he uses this relentlessly by the way, saying that Rosneft pays more taxes than Gazprom – that Rosneft is the company thanks to whom seniors are getting their pensions and their salaries. And it’s an argument that carries weight, Putin believes this to be very important.

So Rosneft and Gazprom are two different instruments, one for foreign policy and the other for the domestic situation.

Yes, exactly.

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