Streetwise Professor

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.

LOL.

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.