Streetwise Professor

November 23, 2017

Igor Is Not Available. Please Leave Your Name and Number, and He’ll Return Your Call as Soon as Possible.

Filed under: Economics,Energy,Politics,Russia — The Professor @ 10:27 pm

Who knew that Igor Sechin was such a shy and retiring type? He has been summoned thrice to testify at the Ulyukaev bribery trial, and thrice he has failed to appear. One time he apparently dodged the summons by hiding in his office, and having his staff refuse to accept it. The other times he has said his busy travel schedule precludes him from attending. He has been summoned yet again to appear on 27 November, but the judge in the case said that Sechin indicates that his schedule wilt allow him to testify before the end of the year.

What will his next excuse be? “Sorry. I’m washing my hair that day”? Alas, “I’m scheduled to have my mullet trimmed” is no longer credible.

So why is Igor so reticent? After all, it is because of him, and a sting in which he participated, that Ulyukaev is in the dock. I discussed the issue with a Russian who follows the situation closely–perhaps too closely for comfort, in fact–and we pretty much agree on three possible explanations.

First, embarrassment. Transcripts, then audio, and now video of the sting have been released. Sechin does not come off well in these, and his offer of sausages in a hamper has become something of a running joke in Moscow. Relatedly, Sechin’s behavior violates the norms of inter-elite interaction (sort of like violating the mafia code), and this is there for all to see.

Second, there have been inconsistencies in the prosecution story. Sechin may dread cross-examination that will expose the episode as entrapment or fraud.

Third, Sechin may be testing the limits of his power and autonomy, or deliberately flouting the rules to show that he is an untouchable.

Will we ever learn the truth? This being Russia, there is considerable room for doubt. But one thing we can be sure is not the truth is that Sechin is a respectable figure. He is either an arrogant thug who operates outside the law–or wants to do so. Or he is a buffoon who played out a charade–badly–in order to punish someone who tried to thwart him.

Come to think of it, I’m going with “both”.

And it is not that Sechin’s performance as head of Rosneft compensates for his buffoonish thuggery (or is it thuggish buffoonery?). Indeed, the last earnings report was a disaster, and there are still many questions about the whole Rosneft-Glencore-QIA-Intesa-VTB-CEFC-Ivan Doesky* deal, and just how money from that deal made it (or didn’t) to the Russian budget to fulfill Putin’s privatization promise.

Rosneft’s stock price has been lackluster, at best. Yet the company has been on an acquisition binge overseas. (And how is that Venezueula thing working out? Pouring money down a corrupt rathole–sheer genius! What strategic vision!)

Things have gotten so bad–and so impossible to ignore–that even Sberbank released a scathing criticism of the company:

In the 64-page research report, dated October 2017, Sberbank’s division Sberbank CIB called on Rosneft to change its strategy “markedly” after the energy company incurred huge debts following an acquisition spree at home and abroad.

“Rosneft has been touting its top-down efficiency effort, complete with Stalinesque tales about employees being confronted with charges of malfeasance at management meetings and marched straight into police custody,” the initial report said.

. . . .

The report’s authors, in a section titled “Rosneft: We Need to Talk About Igor”, also said Rosneft’s powerful Chief Executive Igor Sechin “almost single-handedly sets the company’s strategy”.

They calculated that since purchasing oil and gas producer TNK-BP for around $55 billion in 2013, Rosneft had spent a net $22 billion on acquisitions, “with no clear focus”.

“Assuming he remains in charge, the company will continue to pursue volume growth. In doing so, its heft will push it further out of Russia and perhaps further out of oil. This will only disappoint its shareholders,” the report said.


Actually, Sberbank wasn’t laughing, because Igor and Rosneft took extreme exception to the snarky criticism. Sberbank subsequently withdrew the report and reissued it, minus the offending language.

One can imagine what transpired in order to achieve that result.

Thus the management of the world’s largest publicly traded oil company (by volume, NOT by value, to be sure). Run by–indeed dominated by–a strategic imbecile who attempts to compensate for his managerial incompetence by strong-arming his domestic rivals into giving up their resources, and engaging in clownish masquerades to frame up those who have attempted to thwart him.

There are larger lessons here too. Keep Igor in mind whenever anyone shrieks about Putin’s fearsome juggernaut. If the management of a national champion in the largest and most important industry in Russia is any indication, the colossus has feet of clay–and a head of brick.

* And no, Donald Trump is not one of the Ivan Doeskys, dossier notwithstanding. I am referring to the unknown party or parties who (a) chipped in the difference between what Glencore, QIA, and Intesa cop to have paid, and the amount that Rosneft claim to have received, and (b) indemnified Glencore against loss.

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  1. Who says there’s no such thing as unconditional love. It’s the only explanation for Putin and Sechin. I can’t figure out how this current financial condition helps anyone, though. That’s the most bizarre part. Is Putin afraid of Sechin? How could that be? Surely the robbery is suffering from diminishing returns.

    Comment by Howard Roark — November 24, 2017 @ 3:40 pm

  2. “Rosneft: We Need to Talk About Igor” One thing is sure: Sechin does not possess a self-deprecating sense of humor! Laugh at him at your peril.

    “sort of like violating the mafia code” The codes governing conduct of “omu d’onuri” (Sicilian) or “uomo d’onore” (Italian) are remarkably similar as to those governing the вор в законе. I’m not sure that it applies here: where’s the bullet? Maybe when Netflix gets round to doing a series on the Russian kleptocrats, “plata o plomo” can become “ten million dollars or a hamper of sausages” 🙂

    Comment by Simple Simon — November 25, 2017 @ 10:23 am

  3. Ivan-doesky ! Bizarre bird.

    It all started with an Ivanesque-Monumental flop yes- Rosneft-Glencore-QIA-Intesa-VTB-CEFC-Ivan Doesky* deal,Aka Glencore re leveraging 2.0.

    With the same stone, Some think you can kill two birds.
    Guess the newly found accrual junk justify the skepticism about Rosneft, its management- plus all the putative knowledge (IFRS PwC EY adjusted) about commodity trading.

    Comment by Simon Jacques, ERP — November 25, 2017 @ 4:57 pm

  4. Venezuela isn’t even the best part. A month ago, Rosneft advanced the Iraqi Kurds $1 billion for the oil around Kirkuk, about a week before it was reclaimed by the Iraqi Army. The Kurds are now quite understandably urging Rosneft to figure things out with Baghdad.

    Incidentally, I bumped into the guy tasked with the thankless job of rewriting the Sberbank report just a few days ago. Small world, huh.

    Comment by S/O — November 26, 2017 @ 9:31 am

  5. @S/O. Am I having an acid flashback? Long time, no hear.

    I had mentioned the Kurdistan blunder in an earlier post and on Twitter. It is truly hilarious.

    It is a small world.

    The ProfessorComment by The Professor — November 26, 2017 @ 5:32 pm

  6. Since c.2015 you appear to have become less Russophobic; I have become less Putinophile, more economically right-wing, and have self-deported myself back to Russia; and we both seem to like Trump.

    So yes, you could say the past few years were rather trippy.

    Hopefully this means future discussions will be more convivial.

    Comment by S/O — November 27, 2017 @ 5:45 am

  7. We have GE, Russians have Rosneft. I got out of GE before they went on their M&A binge. I’ve been laughing all the way to the bank. GE is still massively oversubscribed. It’s just that institutional investors can’t accept when their darling is abused by a power-hungry buffoon, be he American or Russian.

    Comment by doc — November 27, 2017 @ 9:21 am

  8. I think much of the Russian story line regarding Trump is fake.

    Comment by Vanesa Rose — November 29, 2017 @ 12:27 pm

  9. Poor old igor

    Comment by Vanesa Rose — November 30, 2017 @ 8:45 am

  10. Since c.2015 you appear to have become less Russophobic; I have become less Putinophile, more economically right-wing, and have self-deported myself back to Russia; and we both seem to like Trump.

    That’s good to hear, and I mean that.

    Comment by Tim Newman — December 2, 2017 @ 7:27 am

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