Sechin reportedly to leave Russian government

By bne IntelliNews March 19, 2012

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Silovik-in-chief, Deputy Prime Minister Igor Sechin, is set to leave the government on Dmitry Medvedev becoming prime minister, four sources told business daily Vedomosti. The departure of a man once described as "the scariest man on the plant" could mark a shift to more liberal energy politics, say analysts, with Sechin possibly being replaced by head of Rosatom, liberal-minded Sergei Kirienko.

According to Vedomosti, Sechin would not serve in a government under Dmitry Medvedev, with the two said to strongly dislike each other. It is possible that he could follow his master Vladimir Putin back to the Kremlin, where he served as deputy head of the administration before joining the cabinet in 2008. However, the top post in the Kremlin has already been taken by Putin confidante Sergei Ivanov, and it is unlikely that Sechin will accept a factual demotion, writes Vedomosti.

Sechin's likely departure from government raises the possibility of a liberalization of Russia's energy policies. According to an investigation of Sechin's secretive career in Vedomosti, also published March 19, although Sechin does not feature in it as a KGB employee, as has often been asserted, with his employment in Angola in the 1980s down to his knowledge of Portuguese rather than vice versa, numerous associates describe him as very conservative and state-oriented, and as having played a crucial role in taking down Mikhail Khodorkovsky's Yukos in 2003-2004 "lest a company with Western shareholders hold a majority in the Duma."

Sechin, described as associates as a workaholic who is interested in power not money, is also seen as the man supporting the rise of oil trader Gennady Timchenko, owner of the mysterious Swiss trading company Gunvor that trades a large part of Russia's oil exports. Timchenko and Putin also featured as co-founders of a judo club in Petersburg, while another Putin judo associate Arkady Rotenberg has also risen from rags to riches on the back of state-owned energy business, under Sechin's watch. It is the rise of Putin associates Timchenko and Rotenberg that have undermined Putin's reputation for relative independence from oligarchs and added ire to mass demonstrations in Moscow over the winter, and this may have also weakened Sechin's position. Sechin has since overseen an anti-corruption campaign in the energy sector, but largely exempted state oil company Rosneft from its reach.

"We consider Sechin, who currently oversees utilities for the government, as a very conservative politician: he is a proponent of increased regulation of the sector and the main opponent of privatization," write analysts from Aton Capital. "If he departs from the government, we believe the state's strategy towards the utilities sector might become more liberal, which would likely trigger strong share price performance. We consider the news as positive for the entire utilities universe (except for InterRAO, which enjoyed strong political support from Sechin) and for the MRSKs in particular, since we expect the privatisation process to accelerate if Sechin leaves the government."

According to Vedomosti, Sechin's likely replacement could be liberal-minded Sergei Kirienko, currently head of state corporation for atomic power Rosatom. Kirienko last served in the government as prime minister for half a year in 1998, resigning after the government defaulted in August 1998. As a matter of record, it was Kirienko who phoned Putin to tell him he had been appointed head of the security service FSB in April 1998. Kirienko was brought into government by his mate and fellow liberal from Nizhny Novgorod Boris Nemtsov, who is currently undergoing a renaissance as extra-parliamentary opposition leader, and he then later headed the liberal Union of Right-wing Forces together with Boris Nemtsov, one of Russia's main opposition leaders, and Antoly Chubais, currently head of Rusnano. As a liberal, Kirienko would be more compatible with Medvedev than Sechin.

Signs of a thaw in energy policy seem to have prompted Lukoil CEO and owner Vagit Alekperov to call for privately owned Lukoil, Russia's second largest oil company, to be given access to the Arctic offshore fields currently reserved - largely thanks to Sechin - for state-owned companies Rosneft and Gazprom. In an interview in the Financial Times on March 19, Alekperov said that reserving the offshore Arctic exclusively for Gazprom and Rosneft had "yielded no positive results" and would soon be abolished. Alekperov said Putin backed the change and that Lukoil had more offshore expertise than Rosneft, and also called for a shift to a profit-based tax system, instead of the current production-based regime in the oil sector to encourage investment.

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