Streetwise Professor

August 2, 2013

Rosneft: Corporate Frankenstein

Filed under: Economics,Energy — The Professor @ 3:29 pm

It’s Friday, and so a funny is called for, and this article on Rosneft in Eurasia Review (“News and Analysis”!) fits the bill.  The Tiger Beat tone of Kerim Has’s article has to be read to be believed.  Yes, he does acknowledge Rosneft’s dependence on the Russian state, but he still gives the impression that Rosneft is a real commercial venture.

Rather, it is a corporate Frankenstein, stitched together from stolen body parts and vivified by jolts of state power.  Here’s how the article treats the most important such part:

At this time, Yukos, then the largest petroleum company in Russia was having its assets transferred to Rosneft, a process which continued until 2007. And Sechin was one of the main actors in the Kremlin’s energy policy in this process

“Having its assets transferred.”  How’s that for a euphemism?: that’s not funny, it’s sick.  Note the passive voice.  Just who did the transferring?  How did that “transfer” take place?  And-most importantly-was the transfer consensual?

My neighbor had his assets transferred once.  It was called a B&E by the police.

I actually agree with one part of the article:

To sum up, energy politics and “pipeline diplomacy” which aimed Russia to regain its “global power” position in international arena seem to keep their vital importance still for long as key instruments of Kremlin’s foreign policy. During 2000’s, Putin’s this state-centred energy strategy allowed Gazprom to become a giant company in both the domestic and international natural gas markets. And now, it is being reapplied to clinch Rosneft’s dominance over the petroleum production and exporting sector. Rosneft is taking on important duties for the Kremlin, and it looks as if it will be one of the vital pillars of Russia’s transformation into an energy superpower.

There is no doubt that Putin will succeed with Rosneft just like he “succeeded” with Gazprom.  He will succeed in creating a corrupt, bloated, inefficient, wasteful firm that is indeed a giant.  But the most gigantic thing about it will be its capacity for value destruction and peculation.  Indeed, he’s almost there.

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