Signals from Moscow are interesting in many ways!
In the immediate aftermath of the demise of the USSR, while Kremlin began to loose its global political clout as the world’s superpower, market economics became the buzzword — even in Moscow. This transformed virtually all the spheres of life in the former USSR.
In the energy sector, Russia spent much of the first half of the 90s dismantling its, inefficient, state oil apparatus, and then gathered the fragments into more or less viable corporations. Last week, the main gas production unit of Yukos, the Yuganskneftegaz went under hammer. The Yugansk auction was the culmination of a Kremlin campaign to crush Yukos’s politically ambitious principal owner, Mikhail Khodorkovsky, and seize control of the strategic sectors of the economy, sold off in the chaotic privatizations of the 90s.
The auction was won by Baikal, a previously unknown firm that cast a winning bid of $9.4 billion. Interestingly the Baikal finance group only applied to take part in the auction of Yugansk after a bankruptcy court in Houston, US issued an injunction restraining Gazprom, the apparent choice of the Kremlin, and the Western banks from taking part in the auction.
Two days later, the Russian state oil firm Rosneft bought off 100 percent shares of the Baikal Finance Group, the winner of the price gift that Yuganskneftgaz is. The move has been regarded by analysts as one of the most decisive interventions by the Kremlin in business affairs since the fall of the Soviet Union. This has virtually put Yugansk’s assets out of reach of attempts by Yukos’s lawyers to halt the piecemeal annihilation of the company.
The transaction brought back more than one-tenth of the Russia’s crude output effectively under state control. Yugansk pumps one million barrels of oil per day. Acquisition of Yugansk has transformed Rosneft into one of Russia’s biggest oil firms with production of 1.45 million barrels per day and bringing it at par with the Libyan crude production. Speculation is rife in the international energy press that Rosneft, the new buyer of Yugansk may ultimately be merged with the state owned Gazprom, already a heavy weight in the Russian energy industry.
International oil companies are already having second thoughts about investing in Russia. Many market watchers are of the opinion, that the manner in which the Kremlin has handled the Yukos issue, has all the hallmark of a broader game plan put in action. In a world, where energy and energy security is becoming a major foreign policy issue for most of the industrial countries of the world, the Russian objectives seem very clearly defined to spread its influence and regain at least some of the lost glory of the USSR days. Many feel that one of the Russian energy sectors gets its final shape, it may come to represent economically some thing that Russia now lacks militarily the capacity to project influence beyond the Russian borders.
Much of the groundwork for this has already begun, as Russian President Vladimir Putin has recently traveled to India and Brazil this year, with the intention of projecting Russia’s economic influence abroad. Stratfor.com, an energy portal sums up the situation as following; “As global energy demand continues its rapid growth, more countries will come to depend on Russia for their energy supplies. This will be Russia’s opportunity to wield renewed global influence.” Russia is endeavoring hard to emerge once again on the global political scene in a big way. And its energy resources are just one of the tools in its command to steer it toward that elusive goal. Politics continues to influence energy issues indeed in a big, big way.
