Putin Confidant Sechin Targeted as U.S. Sanctions Russian Elite

Photographer: Andrey Rudakov/Bloomberg

OAO Rosneft Chief Executive Officer Igor Sechin was Russian President Vladimir Putin’s colleague at the St. Petersburg mayor’s office before rising to become the head of state-run OAO Rosneft, which over the past decade he built into the world’s largest publicly traded oil company by output and reserves. Close

OAO Rosneft Chief Executive Officer Igor Sechin was Russian President Vladimir Putin’s... Read More

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Photographer: Andrey Rudakov/Bloomberg

OAO Rosneft Chief Executive Officer Igor Sechin was Russian President Vladimir Putin’s colleague at the St. Petersburg mayor’s office before rising to become the head of state-run OAO Rosneft, which over the past decade he built into the world’s largest publicly traded oil company by output and reserves.

Rosneft CEO Igor Sechin, the ally of Russian President Vladimir Putin targeted by escalating U.S. sanctions over the Ukrainian conflict, is considered to be one of Russia’s most powerful men.

Sechin, 53, was Putin’s colleague at the St. Petersburg mayor’s office before rising to become the head of state-run OAO Rosneft (ROSN), which over the past decade he built into the world’s largest publicly traded oil company by output and reserves. Along the way, it absorbed rivals including Mikhail Khodorkovsky’s Yukos Oil Co. and BP Plc (BP/)’s Russian joint venture. As Russia’s energy czar, he bagged Exxon Mobil Corp. and BP as partners in Putin’s vision of a state-led crude industry.

“Sechin is easily the most influential person in the country after Putin,” says Sergei Markov, a political analyst who advises the Kremlin and vice rector of the Plekhanov Russian University of Economics in Moscow. “Putin trusts him more than anyone else.”

Starting in 2004, when Putin named him Rosneft’s chairman, Sechin orchestrated the takeover of the main assets of Yukos, the country’s biggest oil producer at the time, according to Khodorkovsky and former Yukos managers Bruce Misamore and Alexander Temerko. Having become Rosneft’s CEO in May 2012, Sechin last year steered the company’s $55 billion takeover of TNK-BP, a joint venture between BP and a group of Russian billionaires.

Financial Warfare: an Alternative to Military Force

Rosneft controls 40 percent of crude production in Russia, making it the flag-bearer of Putin’s push to reverse some of the free-market gains after the end of the Soviet era that has handed sway over major chunks of the economy to his associates.

Signal Sent

Targeting Sechin sends a signal that the U.S. intends to ratchet up pressure on Russia, according to Anders Aslund, a senior fellow at the Peterson Institute for International Economics in Washington who advised the Russian government in the 1990s amid a privatization drive.

“The Russians will see that now it’s sanctions against Sechin, next it will be the company, targeting finances, technology,” Aslund said by phone. “They will anticipate it, and the markets will too.”

The TNK-BP agreement was announced in October 2012, a month after Deputy Prime Minister Arkady Dvorkovich, an ally of Prime Minister Dmitry Medvedev who favors privatizing state assets and is responsible for the energy industry, indicated he opposed it. “What Sechin wants, he gets,” says Sergei Guriev, an economist and critic of Putin who fled last year to Paris.

Rosneft, about 70 percent state-owned, today is under the sway of officials who consider the company their “fiefdom,” according to Valery Nesterov, an oil and gas analyst at Sberbank Investment Research in Moscow.

Communist Mindset

Sechin, a state bureaucrat who has no hands-on oil experience unlike counterparts at Chevron Corp. or Royal Dutch Shell Plc (RDSA), represents a ruling elite whose mindset is closer to the Soviet communist era of the 1980s than 21st century capitalism, according to Masha Lipman, an analyst at the Carnegie Moscow Center.

In one incident last year, Sechin shouted at a Rosneft manager who questioned why the company is working in Cuba when the island nation has limited oil reserves. Sechin replied that Cuba has plenty of sugar and a first-class health system, according to a person who was at the meeting. As a result, Rosneft decided to send its employees there for medical treatment.

Sechin is an admirer of socialist icons such as Cuba’s ailing Fidel Castro, the late Venezuelan leader Hugo Chavez and the executed Argentine Marxist Che Guevara, according to Victor Mashendzhinov, who studied with Sechin at college. As a young man, Sechin served alongside Cuban fighters in the Cold War hot spots of Angola and Mozambique.

Khodorkovsky, freed in December after a decade in prison on a tax-evasion and fraud conviction, said that Sechin has helped shape and execute Putin’s economic policies.

“Sechin is a real oligarch, in the classic meaning of this word,” Khodorkovsky told Bloomberg News in a December interview in Berlin. “He convinced Putin that state capitalism is right and is realizing this idea in practice.”

To contact the reporters on this story: Henry Meyer in Moscow at hmeyer4@bloomberg.net; Irina Reznik in Moscow at ireznik@bloomberg.net

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net Paul Abelsky

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