International Conference

Patterns of Corruption in the 21st Century

September 6-7, 2008
Athens, Greece

Corruption and Economic Nationalism

Evidence from the Russian oil sector

Rizopoulos Yorgos & Sergakis Dimitrios

University of Picardie, France

First Draft
Do not quote

Pattern of business/government relations in Russia

Russian society is relation-based more than rule-based. Indeed, private relationships govern
social and economic transactions, while personal networks are crucial factors enabling
performance and promotion of interests. At the same time, federal structure and powerful
dispersed interest groups result to an important role played by local and regional governments
concerning economic activities. Firms have to deploy political strategies, legitimate their
action and receive support by politicians, integrate local policy networks and, also, bribe.

As usually, business/government relations are based on resource interdependencies. Firms try

to legitimize their strategic goals, use the state’s coercive power, benefit from market failures,
shape the rules of the game and, whenever possible, make political priorities match their own
objectives. Influence of authorities and politicians is a necessary condition for firms’
performance. In return, the government obtains otherwise inaccessible resources otherwise
inaccessible resources through relations with firms. Their links stand on this reciprocity
balance and mutual resource dependency. Interactions took place inside networks which can
be considered as systems of interest intermediation inside which firms are negotiating issues
crucial to their activity with state/government actors.

From 1990 on, it was the Party jointly with the business elite who became the pillars for the
reforms. They have used market and democratic reform terminology for access to power, in
the face of a weakening state. Private interests promote the wholesale destruction of old
political institutions. Reform and mass privatization are weapons against the Party and the
central state, totally disorganizing economic activities during several years. The programmatic
destruction of the state/party administrated economy was accompanied by the emergence of a
merchant financial oligarchy, an abrupt disruption of production and distribution relations,
and a severe economic crisis. In a context of institutional and economic disorganization, and
as a direct consequence of the government's weakness and the degradation of its institutions,
the business development model stressed tight integration with the state (at both a central and
regional level) that could offer protection against competition. Privatization was perceived as
a threat for existing interest groups. In a very unstable context, complex soviet-type networks
linking political and economic actors become the main institutions substituted for a
weakening State and pursuing protection-oriented strategies.

The 1998 crisis and the Putin’s election marked a turning point with the recognition of the
need to strengthen the state, against the chaos and anarchy prevailing during the nineties. The
result of Putin's policy was the empowerment of the bureaucracy. This newly consolidated
status allowed the government bureaucracy to make a transition from the privatization of
power in the interest of business elite (what we can call the “state-capture” model of the
nineties), to a business-capture model, with private companies converging to the wills of state
bureaucracy. In parallel, through horizontal and vertical integration, business elite created big
holding companies capable to influence policies. Interestingly enough, the rebuilding of the
State during the years 2000 and the redefinition of the relation between the economic and the
political elite do not radically change the pattern of business/government relations. The result
of this relational web is, once again, barriers to the entry of new actors and protection-oriented
strategies. Indeed, the redefinition of relations with the oligarchs leads to the protection of
their economic interests in exchange of their support to Russia’s search of power.
 Russian Business/Government Networks (Protection-Oriented)

PNC NF
C PNC

NF G

NF
PNC
PNC

G: Government (federal or local)

NF: National Firms

NE: Potential New Comers staying out of the market

The special features of these business/government networks in Russia are: Recurrent and
dense relations of a small number of public and private actors (strong ties), high internal
cohesion and convergence (shared feeling of belonging to the same community), normative
behaviors, and exclusion of new actors with relative isolation from external influences.

Privatization, property rights and embezzlement in the Russian energy sector

Privatizations in the Russian energy sector followed a particular pattern, in connection with its
strategic importance. In the first stage, holdings emerge on the basis of the transformation of
production associations into joint stock companies, according to the 1992 law. Initially they
hold the totality of the actions which are then distributed in the form of vouchers to the
employees, either on the level of the companies themselves (in the case of electricity and oil),
or only on the level of the financial holdings (in the gas activities). As a result, the gas sector
remains organized as a monopole, the associations of production being gathered inside a
single privatized joint stock company, Gazprom. We can observe the same pattern in the coal
sector, through the privatization of the Rosugol holding. On the contrary, the oil sector bursts
in various holdings organized on a regional basis. However, an official holding is also created,
Rosneft, which retrieves the actions preserved initially by the State.

The creation of a monopoly in the gas sector strongly influences the position of this company,
since it remains close to the power and directed by members of the former Soviet
nomenclature. It becomes a major actor in the implementation of centrally defined industrial
policies and the example of a stability model of the elites (providing also a Prime Minister to
Russia in the person of V. Tchernomirdyne). At the same time, the atomization of the oil
sector makes it an important source of rents and fast enrichment following apparently the
market economy mechanisms, even if foreign investors are excluded from this first stage of
privatizations. Indeed, they are authorized to bid but they have to receive an authorization
delivered on a case-by-case basis by the federal government. In practice, it means their
exclusion from the process.

Initially, Rosneft controls 38% of the actions of production associations, 38% of refining
associations and 24% of distribution associations. Later on, Rosneft is charged with a mission
of reconstruction of the oil industry initiating the creation of a dozen of big oil companies,
implying the transfer of some associations to these new entities. The new holdings (Lukoil,
Surgutneftgaz, Yukos, Slavneft, Sidanko, Eastern Oil Company, Onako, Tyumen Oil
Company, Sibneft, Tatneft, Bachneftekhim, Komitek, Yunko) are in their turn privatized.

The next phase (1995-1998) starts with the “loans-for-shares” decree signed in September
1995 by Yeltsin and leads to the emergence of the oligarchic groups around some holdings
created at the beginning of the ninties (Yukos, Surgutneftgaz, Sidanko, Lukoil…) closely
linked to the financial capital (Menatep, Uneximbank,…).

On the whole, the money recuperated by the State is derisory and the beneficiaries of the bids
make part of a particularly restricted circle. At the same time oil and gas companies have
hardly paid any taxes during several years. Nevertheless, this outcome cannot be solely
explained by the venality of the enforcing organizations. It is also the result of the willingness
to create big industrial-financial poles indebted to the political power and likely to implement
a dictated from the top economic policy. Initially, the international activities of these groups
are rather weak, the only exceptions being Lukoil and Gazprom which remain under the
State’s control.

Putin’s election implies a redistribution of cards and new policy orientations. Meanwhile,
even if some oligarchs are prosecuted, most of them retained their fortunes and power within
their empires, which enjoy relatively stable relationships with the central and local
administrations as well as with law enforcement agencies. Oligarchs can easily be elected as
governors, senators or members of the Duma by openly bribing local authorities and the
electorate. The only condition for this “amnesty” was to accept a partial re-nationalization and
the genesis of the economic nationalism in the oil and gas sector.

Evidence of Russian Economic Nationalism

Economic nationalism implies that economic policy follows the national priorities, the cost-
benefits analysis being a secondary issue.

The seeds of Russia’s nationalistic government policies in the energy sector lay in the mid-
1990s during the era of turbulence and increasing disintegration inside the Russian
Federation.1 Russia’s strategic agenda became a matter of wider public knowledge rather soon
after Putin was elected for a second term in spring 2004. Several statements stressing the need
for the state to control strategic natural resources appeared in the media in the second half of
2004, putting public pressure on the government to start preparing a new law on subsoil use,
aiming at barring foreign companies from owning strategic resources (Lanes, 2005).

In June 2005, the then Prime Minister Fradkov appointed Natural Resources Minister Trutnev
to be responsible for the subsoil law development, and the Russian Government submitted a
first draft law to the State Duma.2

The goal of this nationalist government policy is the creation of Russian-owned corporations
in key industries of the economy with either state finance (such as funding capital received
from the state, favorable loans from Kremlin-friendly financial organizations, etc) or by using
administrative measures, such as environmental or construction constraints, taxation, regional

1
Putin wrote in his dissertation, defended in 1997, that raw materials are the basis for Russia becoming a
superpower in the sort run, and that there should be tougher state regulation alongside market mechanisms (Jack,
2004). He also emphasized the need to create conditions for investment, including foreign companies in
appropriate conditions. Putin’s goal is to increase the attractiveness to foreign investors while enhancing Russian
state control (Balzer, 2005).
2
In October 2005, Trutnev stated that Russia should limit foreign participation in three main areas (Alexander,
Gas & Oil, 2005): scarce natural resources, large mineral deposits and fields close to military sites.
authorities, etc.) to slow down the operations of a foreign competitor or non-Kremlin loyal
Russian corporation. 3 An example, shares in RussNeft were frozen in 2007 as part of a
criminal investigation on the company’s former owner Gutseriyev, concerning allegations of
fraud and tax evasion but also corruption with the Yeltsin administration. Gutseriyev fled
Russia in September 2007 dening any wrongdoing. The company may drop in the hands of
the pro-Kremlin oligarch Deripaska.

The Russian government puts forward some private-owned corporations on the base of their
loyalty or of the Kremlin’s de facto control over them. Control is often exercised via various
administrative means, such as allowing licenses for natural resources, giving priority access to
pipelines, participation in friendly auctions, offering inexpensive state loans or guarantees, or
using authorities to harass a competitor’s business.

The natural gas business is under state control as the state-controlled Gazprom produces over
80% of the natural gas in the country, controlling all the gas pipelines and possessing an
export monopoly. In practice, the government decides who is allowed to use large gas fields.
In the oil business, the systematic takeover by the state has continued since the end of 2003
(the beginning of the Yukos affair). The state’s ownership share in public-traded oil firms has
increased from 32% in 2004 to 47% in 2007. Oil companies owned by regions or the state
accounted for 15% of oil production in 2003, whereas their share has already risen to 36%, at
the end of 2007 (BOF, 2007). Regional oil companies, such as Bashkir, fall into state hands,
via Rosneft and Gazprom. Tatneft, Tatarstan’s oil company and sixth among the largest oil
producers in Russia, could follow. At the same time, the consolidation and concentration pace
of the oil industry is accelerated.

The role of foreign companies lessens due to the law on strategic sectors limiting their
participation in large oil fields. Moreover, global firms, such as Royal Dutch Shell, have
already experienced drawbacks, when they have been forced to sell their ownership in PSAs
(Shakalin II). The recent difficulties of Total and StatoilHydro in the Shtokman field equally
may indicate the state’s interest to acquire stakes from major foreign oil companies in Russia.

3
Obviously, such a policy would harm the investment climate in Russia and slow down the competitiveness of
the energy sector. A vicious circle of reciprocal restrictions between Russia and the EU/USA is also possible.
For instance, the European Commission published in September 2007 new draft regulations for the EU
electricity and gas markets stressing on that no operator will be able to simultaneously control energy production,
transport, and distribution (EW, 2007). From his part, Putin pointed out that Russia’s law is a response to
restrictions on Russian investments in other countries, possibly referring to the US Foreign Investment and
National Security Act and the EU’s plans to impose similar regulations in the energy sector (TD 2007B).
Russia is considering now to set up a new state oil colossus to rival gas giant Gazprom. The
company would apparently be established on the basis of Rosneftegaz which owns shares in
Rosneft and Gazprom. Some assets of Surgutneftegaz and Zarubezhneft may also be included.
Such an oil company would have a combined 2008 production of 3.75 mbd. Based on current
market prices, the stakes which Rosneftegaz holds in Rosneft (75,16%) and Gazprom
(10.74%) may be sufficient for the state to increase its control over the country’s energy
sector. The government could reduce its ownership in Rosneft to 50.1% and use 25% ($ 21.3
bn at current prices) to buy 50.1% of the voting shares in Surgutneftegaz ($ 20.1 bn at current
market prices). The shares in Gazprom are worth $ 25.8 bn at current market prices, and could
be used to buy stated-owned Zarubezhneft and stakes in Bashkir energy companies for
Rosneftegaz. A potential consolidation of oil assets under Rosneftegaz umbrella would not, at
least initially, affect the minority shareholders of Rosneft and Surgutneftegaz. However, if the
state were to decide to further integrate the two Russian oil majors into Rosneftegaz, a
transfer of all minority holdings (foreigners) to a single Rosneftegaz share could be possible.
Without knowing the terms of such a share swap, it is impossible to estimate the impact on
the foreigner shareholders but the interests of minority shareholders do not seem to be at the
top of the government’s priority list. Furthermore, blocking minorities in Rosneft and
Surgutneftegaz would fall into the hands of non-commercial partnerships associated with the
Surgutneftegaz management.

Rosneft has been viewed as a national oil champion while Gazprom has a similar status in the
gas segment. However, Rosneft has always underperformed Gazprom in terms of reserves,
production, cash flows and, therefore, political power. With the incorporation of new assets,
Rosneftegaz could replace Rosneft as the national oil champion, still far from Gazprom in
terms of size but looking well positioned for further consolidation.

As a conclusion, we can say that the development pattern of the Russian oil sector relies on
interweaved protection-oriented networks, structured around some major groups linked by
complex relations of exclusivity with the Federal State and the regional authorities. The
foreign companies are often perceived as a threat and excluded.
Economic Nationalism and Corruption

Two strategies describe the patterns of corruption in the evolution of Business – State
Interaction in Russia: the corruption networks during the State Capture period (early, mid –
and late 1990s) and the emergency of the rent seeking from the super bureaucratic elite during
the Business Capture period (1999 to present).

During the State Capture period (Hellman 1998), corruption in Russia has entered the phase
whereby individually isolated criminal transactions have formed a well organized and
coordinated corruption networks. State weakness has long been a feature key of the creation
of this kind of networks. The breakdown of the administrative system (early 1990s) created a
range of opportunities to take over business, using formerly state-owned property, and making
money on the structural distortions that that have been typical for the planned economy. The
distortions gave rise to a transformational rent. Meanwhile, weakened and half-destroyed
public institutions in Russia were unable to build an effective resistance to the attempts of
various informal interest groups to capture and privatize this rent. These groups organized and
set up for a joint extraction of profit from corrupted activities.

The patron-client relationship from certain networks of individual ties between officials and
particular corporate interests in commercial and financial spheres. Sometimes these
connections involved the bribing of a particular bureaucrat in the interests of a specific
organization. But in most of the cases, officials must join a network of shared services where
no bribes are received or passed on. In such situations, the obligation to join a corruption
network is accompanied with mercenary temptations: as a rule, compensation is a stake in the
network profits. These are illegal payments which are in proportion to the official’s
government position and function in the corrupt transactions (Rimsky, 2004).

The corruption networks formed are both vertical and horizontal. The vertical relationships
are informal, illegal interdependences between bureaucrats within the organization. The
horizontal ones are between different agencies and other structures. These relationships are
used for organized implementation of corrupt transactions that are aimed at: personal
enrichment; allocation of budget funds in favor of the networks; enhancement of the
networks’ illegal profits; or, receipt of competitive advantages by financial and commercial
structures within the corrupt network to generate future earnings. Obtaining financial
resources is practically always the leading goal of each corruption network.
These interrelations are specifically directed to the fulfillment of corrupt transactions,
distribution of state funds in favor of its structure and profitability, or receiving of competitive
financial advantages for members of the networks.

It is important to stress that the accumulation of financial resources and the involvement of
federal officials in allocating them from the federal source in favor of corruption networks in
the main goal of each network. This financial structure transfers money to confidential
accounts and then redistributes the funds among the network members (Mendras, 1998).
Generally, the holders of these accounts use free economic zones throughout Russia, such as
Ingushetia, Kakmyk and Far East regions.

It often occurs that the same financial structure simultaneously finances several corruption
networks. For instance, one bank department conducts business with a specific ministry, other
departments of the same bank, with another ministry. Initially in Russia, the only means to
generate capital was from the rights to oversee banking transactions and state ownership of
industry. Therefore, corruption networks in Russia developed from the basis of existing state
structures, which, before privatization, were in control of the state. Corruption networks were
created for financing the operations by the structures engaged in the export of raw materials.
These networks simply tried to undermine the state structures that were bringing in the fast
earnings.

Thus corruption networks receive financing from the export of oil and gas, energy,
transportation and defense subsidies. Each Russian corruption network includes three basic
subsystems: the commercial or financial branch; government officials; and, law enforcement.
The commercial converts the received privileges into cash. The government officials provide
cover at the decision – making level. This group includes officials whose status guarantees the
desired outcomes. Because most of these decisions are coordinated between several ministries,
there are also interdepartmental groups. However, the relationships and decisions are usually
shaded by “the state interests”, which makes them very difficult to detect. The protection of
corruption networks is provided by law enforcement, which provides information, destroys
compromising files, or even closes criminal cases.

A large company was created in a form of multiple structures, including an off-shore

corporation. It is owned by former Russian citizens, leaders of two criminal groups and two
influential businessmen. A good example of such a corporation can be seen in Gazprom, the
Russian United Power Systems and Lukoil.
The company literally controls one of the Russian Federation regions, i.e., completely
determines the results of the elections, legislative processes, supervises law enforcement
bodies, and large and small businesses in the region. It owns large business in some other
region and through its governor supports the opposition to the government. Through the
Moscow – based banks, a company provides direct communication with the President of the
Russian Federation administration. As a result, all company structures, with enormous
networks, operate in sphere of business, financial institutions, and federal and regional
government structures.

After the election of Putin

In practice there are two ways to form a corruption network. One is from below and the other
is from above. To form a corruption network from below, a successful, expanding business
company needs a relationship and contacts with higher-level officials. Such connections and
contacts are made through expensive gift giving and bribes. Therefore, officials lobby the
interests of a few companies, banks, and businesses. If the official does not have enough
authority, he starts seeking connections with higher level bureaucrats. Thus, local or regional
corruption networks gradually grow into networks at the national level. These national
networks, as a rule, are very large and the same official can simultaneously be a member of
different networks.

To form a corruption network from above, high-ranking officials select loyal subordinates
who construct the network. The purpose of such actions is to maintain strict personal relations
focused on certain operations for the sake of the organization.

Economic losses from the corruption, during the State Capture period, can be examined from
two perspectives. There is money which remains in the country and is invested, ultimately
being spent on goods and services. There is also a direct outflow of capital abroad, which is
close to $2 billion per month. In some cases, 90% of the international loans escape abroad,
both in the form of illegal appropriations and embezzlement, and in the form of kickbacks to
the international officials responsible for the loan decisions. Therefore, the problem of
corruption is directly linked to capital exports and money laundering. Despite the negative
impact, most of Russian businessmen agree that corruption creates the mechanism for
overcoming its complicated legal and administrative systems. In conditions where transaction
costs are unacceptably high, the corruption is actually a salvation.
The Business Capture period (1999 to present) consolidated mainly the federal bureaucracy.
Putin’s election implies a redistribution of cards and new policy orientations: the emergency
of the new federal super elite. The super elite concerns a circle of politicians and top
bureaucrats, which, having ascended to the highest level of authority, face the need to take
into account not only the interests of the groups they arose from, but also strategic interests of
the nation (Zudin, 2003). At this time, the relations between big business and the federal
government were fundamentally changed. In contrast to the situation in the 1990s, the link
between economic nationalism and corruption is the use by individual bureaucrats to directly
capture business. The collective interests of a bureaucratic body are personified by its head
executive. Such individuals can extract a much larger volume of rent than their subordinates
are able to, and can do this on a regular basis. It is only to be expected that such high-ranking
officials try to expand the sphere of competence and responsibility of their departments as this
involves an expansion of potential rent. The consolidation of a department in itself will widen
the range of many opportunities for corruption and rent seeking behavior, because in this case
business clients will be forced to interact with a monopolistic department instead of individual
bureaucrats. As a consequence, the prices for “services” charged by this monopoly can be
higher. At the same time, a consolidated department will also be more capable of
guaranteeing the fulfillment of its “obligations”, because the officers responsible tend to have
a higher rank, and the decisions of high-ranking officials are more difficult to revise.

In the business community, the situation is quite different. It is vary hard for a single
businessman to achieve individual privileges, especially since such privileges can be
contested by other actors. In this contexte, collective actions seem not only less costly, but
could also render more reliable results. Oligarchic enterprises, on the other hand, emerged
mostly out of informal arrangements with the authorities. Each of the oligarchs maintained
their own contacts with representatives of the state. Their business was a kind capitalization of
these contacts.

The Production Sharing Agreement (PSA)

During the first years of transition, the oligarchs invest financial resources to be elected
themselves but investing permanently in election campaigns become too costly and
unpredictable. Therefore, they prefer to bribe deputies for lobbying.
Until 1993, the oil industry formed a lobby in parliament in 1993 focusing on the issue of
PSA legislation. Its core was the faction New Regional Policy founded by Vladimir
Medvedev, the head of the Russian Union of Oil Industrialists. In 1996 the faction, renamed
Regions of Russia, started cooperation with other centrist and reform-minded factions, namely
Our home is Russia, which represented the interests of the gas industry, and Yabloko whose
members dominated the Duma committee responsible for PSA legislation. Together they
controlled a third of Duma votes (Segbers & ali., 1995).

According to Ivanov (2005), oligarchs confirmed that for approximately $200 million it is
possible to buy half of the State Duma and have 200 dedicated people in it. But it was too
expensive, they said. So, they considered that 30-40 influential deputies were enough to push
through necessary laws as PSA.

During this period, there is a market of corruption services and bribes in the State Duma.
Practically each action of a Russian legislator has his price. For example, the appointment of
the deputy to the post of a committee chairman cost approximately $30,000. The price for any
bill submission and its consideration by the State Duma is about $250,000. The state budget is
the major issue that, on a regular basis, is lobbied through corruption networks. Deputies of
such key committees as budgetary, receive approximately $30,000 per year for illegal, corrupt
transactions, whereas their legal wages are approximately 1/15th to 1/20th of the bribes
(Klyankin and Timofeev, 2000).

Progress in PSA legislation became possible only when the political scene changed after
Russia’s financial crisis of August 1998. At this year, major oil companies experienced an
acute shortage of cash, with two of them being threatened by bankruptcy, as a result of the
financial crisis and low world market prices for oil. Accordingly foreign investment became a
high priority to avoid insolvency and continue production. To sum up, the fast progress with
PSA legislation at the end of 1998 was the outcome of a situation in which: a) Russia was in
urgent need of direct investment, b) the relation between Duma and the government had
improved remarkably and c) Russian oil and gas companies increased their lobbying for PSA
legislation.

With the world market price for oil rising from less than US$ 10 per barrel in early 1999 to
more than US$ 35 per barrel in September 2000, the oil industry was able to improve its
financial situation without foreign investment. Among the Russian oil companies, the Western
capital appeared to be both unnecessary and unwanted. In February 2002, Oleg Koshikov,
head of the economic development ministry’s PSA department, claimed that investors in
about a quarter of PSA projects were not ready to move forward and suggested the licenses
for the related fields to be under threat.

In 2006 Russia cancelled environmental permits for the country’s largest foreign
investment project Sakhalin 2. Many of the stipulations in the 1994 PSA were unfavorable to
the Russian government and left little room for negotiation. For instance, a no cost cap
reduced incentives for cost control (by 2006 cost overruns at Sakhalin 2 amounted to $11
billion). As a consequence, the foreign operators were forced to sell a 50% plus one share to
Gazprom for $7.5 bln.
Annex 1
The oligarchs during the Yeltsin period (1998)
Vladimir Potanine
Michail Khodorkovski
Piotr Aven and Mikhail Banks: Alfa – Bank, Alfa – Kapital, Alfa – Estate
Fridman
Vladimir Vinogradov
Vladimir Goussinski
Alexander Smolenski
Boris Berezovski
Rem Viakhirev
Vagit Alekperov
Berelowitch A., Radvanyi J. (1999)
Banks: Oneksim Bank; MFK, Baltoneksimbank,
Financial sector: INROS Kapital, Rosekspertiza, Interros – dostonstvo, Interros –
Leasing, Slavinvest, Svift
Industrial sector: Sidanco, Sourgoutneftegaz, Bratsnefteproduck, Lomo, Energia,
Twel, OKB Soukhoi, Permskie Motory, Aviadvigatel , Norilsk – Nickel,
Baltiiskii Zavod, Nitrogen, Irgiz, Phosphorit, Khimvolonko
Trade: Agrokhimeksport, Zarubekneft, Machinoimport…
Medias: Investia, Expert, Komsomolskaya Pravda, Russkiy
International Participations (shares): Unexim Suisse, Unexim International
Finance, Minskkompleksbank
Banks: Menatep, Samarskii Bank, Menatep St. Petesbourg, SKB – Bank,
Menatep – Erevan, Menatep Finance SA.
Oil sector: Yukos, VNK, Novokouibychev, Samara, Syzran, Neftekhimprom
Chemistry: Apatit, Voskresenskii, Nitron, Ammosphos, Omsk.
Industrial sites of: Krasnoiarsk, Tcheliabinsk, Novokouznetsk, Orenburg
Aviation: Irkoutsk, Kazan
Trade and Services: Rousskie Investory, Torgovyi Dom – Menatep, Menatep –
Impeks
Trasport: Murmansk Shipping
Media: Literatournaya Gazeta, ORT
Trade: Alfa – Eco, Alfa – Art
Oil sector: Tioumen oil
Media: ORT
Banks: Inkombank, Inkombank – Ukrania, Inkom Finanz, Grupp AG
Industry sector: KB Roubin, Rosvooroujenie, Lukoil Artik – tanker, RAO EES –
Rossia, VPK
Media: sponsoring of Novaja Gazeta and Vek
Banks and Finance: MOST – bank, Spasskie Vorota insurance
Trade: MOST – oil, MOST – development, Infeks
Media: Media – MOST: NTV, Ekho Moskvy radio, Novaya Gazeta, Obschaya
Gazeta, Sevodnia, Itogi, Sem Dnieij
Banks and finance: Stolichnyi Bank Sberejenii, Agroprombank, STB, Dobroe
Dela, Alliance – SBS – Agro (joint venture with Alliance)
Oil sector: Sibneft
Media: Kommersant, Stolitsa, Dengi, ORT
Bank: Obedinnennyi Bank
Trade and finance: Logo VAZ, AVVA
Oil sector: Sibneft
Transport: Aeroflot
Media: Madator, Nezavisimaja Gazeta, Ogonek, ORT
Banks: Imperial, Gazprombank, Sovfintrade, Gorizon Investment
Oil sector: Komi TEK
Aviation: Rubinskie Motory
Media: Rabotchaja Tribouna, Troud, Profil, NTV, ORT, Prometeij
Banks: Imperial, Lukoil – Reserv – Invest, Lukoil – Garant, Petrokommertsbank
Oil Sector (industry): Langepasneftegaz, Ouraijneftegaz, Kogalymneftegaz,
Nijnevoljskneft, Astrakhanneft, Kaliningradmorneftegaz
Transports: Lukoil – Arktik – Tanker
Media: TV - 6
Annex 2

Oligarchs during the Putin period (2003)

Holding cpmpany/firm major sector(s)

Oleg Deripaska Base Element/RusAl, aluminium, auto
Roman Abramovich Milhouse/Sibneft, oil
Vladimir Kadannikov Auto VAZ, automotive
Sergei Popov, Andrei Melnichenko, Dimitry MDM, coal, pipes, chemical
Pumpiansky
Vagit Alekperov Lukoil, oil
Alexei Mordasov Severstal, steel, auto
Vladimir Potanin Interros/Norilsk
Alexander Abramov Evrazholding, steel
Len Blavantnik, Victor Vekselberg Access-Renova/TNK-BP, oil, aluminium
Mikhail Khodorkovsky Menatep/Yukos, oil
Iskander Makhmudov UGMK, nonferrous metals
Vladimir Bodganov Surgutneftegaz, oil
Victor Rashnikov Magnitogorsk Steel, steel
Igor Zyuzin Mechel, steel, coal
Vladimir Lisin Novolipetsk Steel, steel
Zakhar Smushkin, Boris Zingarevich, IlimPulpEnterprises, pulp
Mikhail Zingarevich
Shafagat Tahaudinov Tatneft, oil
Mikhail Fridman Alfa/TNK-BP, oil
Boris Ivanishvili Metalloinvest, ore
Kakha Bendukidze United Machinery, engineering
Vladimir Yevtushenkov Sistema/MTS, telecoms
David Yakobashvili, Mikhail Dubinin, Sergei WimmBillDann, dairy/juice
Plastinin
Guriev S., Rachinsky A. (2005)
Annex 3

State acquisitions in oil and gas sector, 2004-2006

Company Sector Date Mechanism
Tuaspe oil refinery Oil refining December 2004 Rosneft purchases 40%
from minority shareholders
to take full control of the
refinery.
Yuganskneftegaz Oil and gas December 2004 Rosneft purchases 76,8%
stake from the firm OOO
“Baikalfinansgrupp”, the
winner of a state-organized
auction of Yuganskneftegaz
shares to settle tax debts
Tambeyneftegaz Oil and gas May 2005 Gazprombank purchases a
25% stake from Novatek
Northgas Oil and gas June 2005 Gazprom regains control of
independent gas producer
Northgas, taking over a
51% stake following
litigation
Gazprom Oil and gas July 2005 State – owned Rosneftegaz
purchases 10.7% of
Gazprom to raise state’s
direct stake in Gazprom
above 50%.
Selkupneftegaz Oil and gas July 2005 Rosneft purchases 34%
stake from independent gas
producer Novatek
Sibneft Oil and gas October 2005 State-owned gas monopoly
OAO Gazprom buys
69.66% stake for $ 13.1bn.
Verkhnechonskneftegaz Oil and gas October 2005 Rosneft purchases 25.9%
stake from Interros Holding
Udmurtneft Oil June 2006 Rosneft acquires a 51%
stake from Sinopec after the
latter buys 96.7% from
TNK-BP for an estimated
$3.5 bn.
Sibneftegaz Gas June 2006 Gazprombank purchases a
51% stake from Itera.
Novatek Gas June-July 2006 Gazprom purchases a
19.9% stake for a sum
reportedly exceeding $2 bn.
Source: OECD, 2006.
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