Wednesday, October 28, 2009

The Growing Influence of Gennadiy Timchenko

by Roman Kupchinsky

On October 26 the Russian daily Kommersant reported that Inter ROA UES, Russia’s primary producer of electricity, whose Board of Directors is headed by deputy prime minister Igor Sechin, decided to replace Gazprom as the gas supplier for its most important energy generating plants with Novatek, one of the few independent Russian gas producing companies.

The co-owner of Novatek just happens to be Russian businessman Gennadiy Timchenko. As a result of this agreement, Gazprom could lose $650 million. (Kommersant, October 26, 2009)

The legend surrounding Gennadiy Nikolayevich Timchenko has been regurgitated in both the Russian and Western media for nearly a decade. He appears to be a man who appeared out of nowhere and rapidly rose to became one of three co-owners of Gunvor, a Swiss-based and Finnish registered oil trading company (only two owners are known by name, the third owners (according to Gunvor they are unnamed company managers) prefer to remain anonymous), which managed to garner a large niche of the Russian oil trading business.

Timchenko, who has Finnish citizenship, is reputed to be close to Russian Prime Minister Vladimir Putin and the latter's closest associates including Igor Sechin, the deputy Prime Minister for energy and the head of not only the Board of Directors of ROA UES, but also of Russia’s largest state-owned oil company Rosneft.

An official document released by the Saint Petersburg City Council on 23 March 1992, which in the possession of the Jamestown Foundation, states that Vladimir Putin, the then head of the foreign trade department of the city council, signed a contract with a Russian company, “Kirishnefteorgsintez”, where Gennadiy Timchenko, the future partner of Gunvor,was employed, to supply 100,000 tons of diesel fuel as barter for the purchase of food goods for the city of St. Petersburg from Norwegian and other non-Russian companies. The St. Petersburg City Council document stated that the contract was illegal and that Putin, along with his co-conspirator, A.G. Anikin, were guilty of defrauding the city council of millions of dollars.

Nobody was prosecuted for this alleged fraudulent agreement and the case soon vanished.

Timchenko's career seemed to dovetail with that of Vladimir Putin who came to champion Russia’s control of ports, pipelines and other infrastructure. In 2008 Putin visited the site of a massive port development near St. Petersburg, where he trumpeted the importance of exporting Russian oil from Russian ports. The project's centerpiece is an oil terminal partly financed by Mr. Timchenko.

A Gunvor spokesman said its port investment is currently "very small" but may become "very substantial."

During the highly controversial Yukos bankruptcy proceedings in 2004, which, according to Mikhail Khodorkovsky, the former head of Yukos, were orchestrated by Sechin, Timchenko was suspected of being involved in creating a dummy company, Baikal Finance, to take control of Yukos’s most important asset Yuganskneftegas. Timchenko has denied these charges and they have never been proven.

The “Baikal Finance Group” gave its registered office as the address 12b Novotorzhskaya street in the Russian city of Tver. The same address was used by some 150 legal entities as their registered place of business. Journalists later discovered that the building only housed the seedy “London” cafeteria and bar.

“Baikal Finance” bought Yuganskneftegaz” for the rock-bottom price of $9 billion and promptly sold it to Rosneft, whose CEO was Sergey Bogdanchikov and Igor Sechin headed the Board of Directors.

When asked about this highly opaque deal, Putin confidently replied on December 21, 2004 at a joint press conference with German Chancellor Gerhard Schroder present, that he knew the people behind “Baikal Finance”, and that they have “worked for years in the energy industry” and therefore all was well.

In January 2009 Gunvor filed a suit against “The Economist” charging the publication with defamation in an article published in November 2008 entitled “Grease my palm: bribery and corruption have become endemic.”

The suit was settled out of court and the Economist printed a statement which stated:

"In a section of our special report on Russia entitled “Grease my palm” (November 29th 2008) we referred to Gunvor and its cofounder, Gennady Timchenko. We are happy to make it clear that when we referred to the “new corruption” in today’s Russia, we did not intend to suggest that either Gunvor or Mr Timchenko obtained their Russian oil business as a result of payment by them of bribes or like corrupt inducements. Rosneft sells only 30-40% of its oil through Gunvor rather than the “bulk” of Rosneft’s oil (as we described it). We accept Gunvor’s assurances that neither Vladimir Putin nor other senior Russian political figures have any ownership interest in Gunvor. We regret if any contrary impression was given."

The Timchenko/Sechin/Putin energy empire seems to be expanding at a rapid pace. Gunvor, according to Russian media reports, is looking to enter the natural gas business, while Sechin, a fierce enemy of Gazprom’s CEO Alexei Miller according to Moscow insiders, appears to be doing everything in his power to discredit the Gazprom management team.

Who will benefit from this sub-rosa dogfight is hard to say, but one potential victor could well be Dmitri Medvedev and his team who are anxious to obtain some measure of control over Gazprom and pry it away from its current overlords.

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