Putin Adviser Sechin Renews Dealmaker Role Beyond Kremlin

Vladimir Putin’s energy czar Igor Sechin, who laid the groundwork for $500 billion in potential investments with Western oil companies, is set to push ahead with the plans even after changing jobs under a new government.

Sechin, 51, was named yesterday to head OAO Rosneft, Russia’s largest oil producer and a gateway for international companies from Exxon Mobil Corp. (XOM) and Italy’s Eni SpA (ENI) to Statoil ASA (STL) of Norway that seek to invest in virgin Russian oil fields.

Foreign executives were watching where Sechin would land after Putin returned to the presidency this month. While this week’s shake-up by Prime Minister Dmitry Medvedev replaced Sechin as deputy premier in charge of energy with Arkady Dvorkovich, and named Alexander Novak as energy minister, neither will challenge Sechin’s stature as Putin’s architect for new oil investments, according to Cliff Kupchan, a Russia analyst at Eurasia Group.

“Sechin will likely remain the kingmaker in the energy sector,” Kupchan said by telephone from Washington. No one else “has Putin’s confidence, and the knowledge and political heft to play the role that Putin wants played.”

Putin and Sechin have made breakthroughs designing tax policies for the industry and attracting investment, according to Vlad Konovalov, head of the Petroleum Advisory Forum, a Moscow-based lobby for foreign oil companies.

Pioneering Deals

“Initially I had the sense that opportunities for foreigners would become more narrow over time,” Konovalov said. “In the past year or two he has swung around, pioneered a bunch of deals, and this whole resource nationalism paradigm has become more nuanced.”

Rosneft shares fell 2.7 percent to 193.06 rubles the close Moscow, erasing yesterday’s gains. The 30-stock Micex Index dropped 3.4 percent to its lowest since July 2010.

Sechin has been Putin’s front man for energy since his first stint in the Kremlin, when the state reasserted control over the industry, building state-run Rosneft into the country’s largest oil producer using the carcass of bankrupt Yukos Oil Co.

Mikhail Khodorkovsky, the jailed former chief executive officer of Yukos, accused senior state officials of orchestrating the demise of his company. The government has denied the charge.

Winning Investors

The cross-border alliances Rosneft signed this year with Exxon, Eni and Statoil to explore Russia’s Arctic and Black Seas were overseen by Sechin. They include plans to tap unconventional oil resources that will be critical to Russia maintaining record crude output and geopolitical clout.

The three foreign oil majors together may invest $7.7 billion in initial exploration of their offshore ventures with Rosneft, their Russian partner has said. Those deals came after Putin on April 12 proposed legislation to cut initial tax payments for offshore developments to win investors. The Russian shelf may attract $500 billion over 30 years, Putin said.

Medvedev bolstered the optimism of potential partners in Rosneft with the appointment of Sechin.

“A raft of breakthrough projects with foreign investments have appeared in the past few years, especially recently,” Medvedev said, according to a transcript of his meeting with Sechin on the government website. “I am sure the projects will rapidly progress.”

‘Battle for Supremacy’

Sechin has worked with Putin since the 1990s, when the now president was deputy mayor of St. Petersburg, and has stood out bringing investment pitches to Putin in recent years to help reestablish Russia’s crude output growth. He was one of Putin’s few key deputies who didn’t move to the Kremlin after the Russian leader’s inauguration on May 7 after four years as prime minister.

The appointment of Dvorkovich, who had been Medvedev’s economic adviser, “could set up an interesting battle for supremacy for the last word in energy policy making if Sechin retains real power with the backing of the Kremlin,” Lilit Gevorgyan, Russia and CIS analyst at IHS Global Insight, said in a note. Dvorkovich and Sechin had sparred over the state’s planned asset sales and its role in the energy industry.

Eduard Khudainatov, who had been head of Rosneft, was appointed first vice president, the oil producer said today.

Medvedev forced Sechin to step down as Rosneft’s board chairman in 2011, after seven years, ordering a sweep of government officials from the boards of state companies in industries they help oversee.

Sechin will continue to play a role in Russia’s new policy making, Putin spokesman Dmitry Peskov said yesterday.

“If anybody had any doubts about Sechin’s control over Rosneft this puts it to rest,” Ronald Smith, a Moscow-based oil and gas analyst at Citigroup Inc., said by e-mail. “He’s right back where he’s been for a long time.”

To contact the reporters on this story: Stephen Bierman in Moscow at sbierman1@bloomberg.net; Anna Shiryaevskaya in Moscow at ashiryaevska@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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