"On the Leonid Reiman story, you are following the wrong trail. It is the Alfa Group -- Megafon's competitor -- pushing this story. The Alfa Group has seriously important connections in the US, especially media. So I would back away from the political slant and stick with what it is almost always about: MONEY!"
-- Peter Lavelle from Dec 14 Pundita post
"Pundita, dear, you must have heard John Batchelor egging on Gary Kasparov last night. Have you noticed that John is out for Vladimir Putin's scalp? Do you think this has something to do with Iran? Or with the WSJniki? Congratulations on your retirement. Of course I will miss you.
Boris in Jackson Heights"
For my part I will miss Pundita-land's Resident Cynic. But we must look on the bright side, Boris. Pundita's retirement saves her readers from dedicating a month to figuring out what is going on with Rosneft, the Alfa Consortium, Mikhail Fridman, the European and American central banks, and the Wall Street Journal-Financial Times crowds. In other words, trying to figure out the ruckus would be as much fun as investigating China's Mystery Illness.
However, I think we could get into the ballpark if we applied Peter's advice about Russia's telecom scandal to the larger situation. In other words, the ruckus probably has something to do with money. It must be really big money, if John Batchelor invites Kasparov on his show twice in the same month to rant that Russian democracy has gone to hell in a handbasket.
Now that Don Evans has rejected President Putin's olive-branch offer to head up Rosneft, I am hoping that Putin will offer the job to a Russian. But at least according to today's Moscow News, he is still looking for an American in the hope this will be a sop to the Wall Street Journal-Financial Times crowds.(1)
Nothing will mollify the WSJniki until Putin is run out of Russia on a rail. And consider the uproar in Europe when Gerhard Schröder agreed to head up Gazprom. The big US-West European investors and speculators are hopping mad about Putin's recent statement that foreign banks are no longer terribly welcome in Russia.
I would think that a frosty climate in Russia for US and West European banks puts Russia's Alfa Bank in a very powerful position and thus, gives Russia's central bank clout in The Casino.(*) Down the line this could make the Russian ruble a contender at The Casino. I am not sure how The Lords of the Craps Table would react to this.
I am also unsure about Mikhail Fridman's position in Russia's post-Yukos era. As Chairman of Alfa Group Consortium he has tremendous power but he has come under fire recently because of a privatization scandal. And he is one of Russia's Oligarchs. I don't know whether his relationship with Putin has changed dramatically since Yukos was broken up.
Pundita does not agree with Peter Lavelle's contention that the Kremlin "stole" Yukos -- not unless you want to consider it stealing when a government does not exert itself to warn crooks that this time they are serious about collecting back taxes. However, the Yukos takeover was messy and also very traumatic for Russia's business community. Certainly, it was a rough way for the government to send the message that the rule of the Oligarchs had ended in Russia.
The one person in all this I haven't read anything bad about, despite his association with Fridman, is Peter Aven, the President of Alfa Bank. I might have to eat my words but his credentials are impressive and to all appearances he is very dedicated to getting Russia on her feet.
So if the WSJniki are simply worried about solvency and efficiency, they might not have a heart attack if Aven headed up Rosneft. The question is whether Putin would even consider a Russian for the post at this time. Any Russian who leads Rosneft will automatically gain tremendous political clout in Russia. Putin might prefer a foreigner for that reason; if so, I think that would be shortsighted. It's sending a message to the Russian people that a Russian can't be trusted to head the nation's most valuable company.
That message undercuts the rationale for going after the Oligarchs, who were perfectly willing to sell out Russia to foreigners. The message also plays into the hands of Russia's xenophobics, which of course follow the hard Right in Russia.
Yet I don't think the xenophobics are just a bunch of Skinheads attacking foreigners, although their recent antics called forth a stern lecture from Putin that "extreme nationalism" wouldn't be tolerated. If we recall that US senators used an ax on Japanese electronic appliances at the height of Japan's attempt to buy up the United States, I think we're in the ballpark about Russian sensitivities at this time.
The Kremlin will keep 51% share control of Rosneft, which still leaves 49% up for grabs to foreign investors. That should be enough for the rest of the world, I should think. So why not put a Russian in charge of Rosneft to assure the Russian people that it won't be McRosneft?
Pundita does not know what the Kremlin would think of my logic, and it could be that offering the top post at Rosneft to an American is tied with a plan to build a pipeline that would deliver up to 1 million barrels of oil per day to the United States from the port of Murmansk. Reportedly the Kremlin may be giving consideration to the plan.
The Kremlin didn't exactly go broke breaking up Yukos but between setting up Gazprom and Rosneft, they took on a huge pile of debt. Yet I think they should be able to scare up foreign investor interest without having to give the plummiest job in Russia to an American.
The long view (which is of no concern to US-managed pension funds) is that it's in America's best interest if the Russian people are happy -- as happy as it's possible for Russians to ever be. They need to stop thinking of themselves as a land of crooks and develop more faith in their future.
Translation: Trying to run Vladimir Putin out of Russia is not the way to encourage more help from his government in dealing with Syria and Iran.
* The Casino is Pundita's name for the international monetary system; The Lords of the Craps Table are those who greatly influence the system; i.e., major central banks, BIS, currency traders for major banks, OPEC ministers, and IMF.
December 21, 2005.
Evans Rejects Putin's Offer to Chair Rosneft
By Maria Levitov
The Moscow Times
"Former U.S. Commerce Secretary Donald Evans, a close ally of President George W. Bush, has declined a controversial Kremlin offer to take a senior position at state-run Rosneft.
Evans told reporters in Washington late Monday that family and business commitments would not allow him to take the job. [...]
Last week, former German Chancellor Gerhard Schröder came under fire after he announced plans to head a Gazprom-led pipeline project that he had pushed while in office.
After Putin hinted on Friday that Rosneft might hire a prominent Westerner, Evans also began to face increasing public pressure not to accept a job with a Russian energy company.
The exact position offered to Evans was unclear, but he told the Financial Times that he had turned down "a position of serious responsibility at Rosneft."
Evans currently serves as CEO of the Financial Services Forum, a group of senior executives from 20 of the largest U.S. financial institutions.
Despite Evans' rejection, market watchers said the Kremlin was likely to continue wooing high-profile foreigners to burnish Rosneft's image ahead of a planned IPO.
The state plans to sell up to 49 percent of Rosneft in an IPO next year to repay a $7.5 billion loan raised to buy a majority stake in Gazprom. A Western executive would likely instill confidence among foreign investors in a company that has been sullied by the messy destruction of Mikhail Khodorkovsky's Yukos empire. Rosneft acquired Yukos' largest production unit, Yuganskneftegaz, after a forced government auction last year.
Khodorkovsky is serving an eight-year prison sentence for fraud and tax evasion in a Siberian penal colony after a highly politicized trial.
Evans' rejection must have come as an embarrassment to the authorities, who failed to sound out their candidate better before making a job offer, said Chris Weafer, chief strategist at Alfa Bank. The next candidate, likely also to be a foreigner, will be tapped more discreetly, he said.
"We know that Schröder is busy," said Peter Westin, chief economist at MDM Bank.
In an opinion piece published in The Wall Street Journal on Monday, former world chess champion and outspoken Putin critic Garry Kasparov called Schröder's decision to work for Gazprom "one giant leap for corruption in the West." Kasparov went on to write that Evans' acceptance of the job "would formally put the Bush administration's heretofore-unspoken presidential seal of approval on the Kremlin's dirty dealings."
Evans also received direct appeals not to take the job in editorials in The Wall Street Journal and the Financial Times. However, he denied that he had bowed to criticism about taking the job, the Journal reported on Tuesday.
Rosneft stands to gain from the clout and expertise of an experienced foreign executive. But Westin said that Evans, who quit his job at the Commerce Department in February, was not the right man for Rosneft.
A senior position at the oil company is not simply an industry job, but also a political position, said Westin. Ethical questions "would be less of a concern if someone came from business, rather than politics," he said.
The next candidate will probably be identified before next summer's Group of Eight summit in St. Petersburg -- and will most likely be an American, Alfa Bank's Weafer said.
The so-called U.S.-Russia energy dialog has hardly moved ahead since the beginning of the Yukos affair in 2003, Weafer said, and the Kremlin could be looking for an American to revive it.
Before he was arrested, Khodorkovsky had been pushing for the construction of a privately owned pipeline -- much to the Kremlin's chagrin -- to deliver up to 1 million barrels of oil per day to the United States from the northern port of Murmansk.
"It's well known that the U.S. has been interested in this project," Weafer said. Before Rosneft took over Yuganskneftegaz, the state did not have its own company in place to run the project, he said.
Now, the Kremlin may be more inclined to proceed with the Murmansk pipeline, and an American in a senior Rosneft chair would help jump-start the process, Weafer said."