Streetwise Professor

July 7, 2011

Pointillism Not Payback, Apparently

Filed under: Economics,Russia — The Professor @ 7:53 pm

It looks like the travails of partly-Alfa Group owned Avianova are not payback for Alfa’s role in torpedoing the Rosneft-BP deal, but are instead just another example of corporate governance a la Russe:

On the surface, the story seems to have all the trappings of every Alfa conflict of yore. (Think BP vs Alfa-Access-Renova, or Telenor versus Alfa-subsidiary Altimo.) But what do these stories actually say about the Russian investment climate?

The two shareholders are preparing to face off at a board meeting in London next week to determine whether Avianova, Russia’s 13th biggest air carrier, should be run by Andrew Pyne, its holding company’s British chief executive, or Konstantin Teterin, a Russian airline executive hired to take his place.

As the FT has reported, Pyne, who has served as chief executive of Whitefish Aviation, Avianova’s holding company, for the past four years, was suddenly barred from entering the company’s Moscow offices last week after Teterin, an Aeroflot veteran, was appointed first deputy general director.

And speaking of Russian corporate governance, this is an absolute riot.  The new chairman of that paragon of efficiency and good management, Rosneft, shared this gem with the world:

“To make this decision [to give up a controlling stake in the company] the government should be guided by a certain calculus, not an abstract notion that the public sector is bad and the private sector is good,” said Nekipelov, who is also vice president of the Russian Academy of Sciences.

According to the privatization plan for Rosneft, which pumps nearly a quarter of the country’s oil, the state will first lower its stake from 75.16 percent to 51 percent and after 2015 sell off more shares to be left with minority ownership.

“Rosneft’s assets are huge. Its capitalization is around $90 billion. To allow some independent directors to manage such assets is a very exotic point of view,” Nekipelov said.

Let’s see.  ExxonMobil market cap: $405 billion.  Chevron: $214 billion.  Shell: $143 billion.  BP: $140 billion.  ConocoPhillips: $130 billion.  How exotic: they are all far bigger, they all have outside directors, they all are privately owned–and they are all far more efficient than Rosneft.  Note that Rosneft pants after all of them for joint ventures.  Rosneft dreams of playing in the same league.  But it never will when it thinks corporate accountability is “exotic”, and that it is an “abstract notion” that privatization can enhance the efficiency of a commercial enterprise.

Two stories.  Two points in the portrait of a dysfunctional “business” culture.

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6 Comments »

  1. The Medvedev abomination and his clan of neoliberal ideologues continues to try to undermine Russia.

    I wish the chairman of Rosneft the best of luck in standing up to the hyenas and vultures circling overhead, who want to return Russia to the days of oligarchic domination (because that is what selling off state companies will do).

    As it is, I’m close to giving up hope on Russia if things continue the way they are, if Medvedev further strengthens his liberal / privatization / foreign-influenced agenda. Only China has any hope left.

    Comment by Sublime Oblivion — July 8, 2011 @ 12:47 am

  2. […] Streetwise Professor » Pointillism Not Payback, Apparently The two shareholders are preparing to face off at a board meeting in London next week to determine whether Avianova, Russia's 13th biggest air carrier, should be run by Andrew Pyne, its holding company's British chief executive, or Konstantin Teterin, and that it is an “abstract notion” that privatization can enhance the efficiency of a commercial enterprise. Two stories. Two points in the portrait of a dysfunctional “business” culture. Comments (0) […]

    Pingback by Two Points Business — July 8, 2011 @ 3:11 am

  3. The Putin vultures have been on the ground so long feasting on carrion and are so sated that they just may not want to take off and circle overhead. Maybe they have achieved their fundamentally lumpenproletariat dreams and now are happy to womanize in peace with occasional public grandiose pronouncements

    Comment by pahoben — July 8, 2011 @ 7:18 am

  4. Surkov says Putin is a divine right monarch, delivered to Russia by the Lord:

    http://www.vancouversun.com/news/Kremlin+aide+says+Putin+gift+Russia/5073385/story.html

    Comment by La Russophobe — July 8, 2011 @ 4:10 pm

  5. He isn’t?

    Comment by Sublime Oblivion — July 8, 2011 @ 9:05 pm

  6. I guess there is a historical analogue on the sending part. The Lord did send a plague of locusts to Egypt.

    Comment by pahoben — July 11, 2011 @ 6:19 am

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