Igor Sechin Rising Star

Igor Sechin star is rising indeed. The Chairman of ROSNEFT is now probably one of the most potent and influential men in Russian after President Putin of course. After the gigantic deal leading to the absorption of TNK-BP by ROSNEFT, making this company one of the most important – if not the one – in the Oil business, after the appointment of Sechin himself to the board of directors of RAO-EES, who and what could stop the man? Of course, on the beginning of July, Dmitry Medvedev, the former President turned Prime Minister sacked Alexander Popov, the head of Rosnedra, an agency responsible for granting licenses to develop natural resources. Alexander Popov is known to have worked with Sechin for years. But this is most probably the last bite of a dying tiger, as Medvedev own position is not well assured. Most of his power has been transferred to the Presidential administration and he is loosing most of his allies since last winter. The probability that he would leave or be dismissed by next fall seems now pretty high. Igor Sechin is then and without doubt the most influential of all Putin’s ally and quite certainly the new Russian rising star.

 

Igor Sechin’s achievements.

 

Sechin has been pivotal in the very transformation of ROSNEFT into not just one of the biggest Oil companies but into a major player in the whole energy market. Through its association with BP it gained an important access to exploration and exploitation technology, not just in the oil sector but in the associated gas too. ROSNEFT gained also a very important technology inflow, which would allow it to be a leader in the shale gas/shale oil sector when Russian authorities would decide that times are come. Recent development in the electric power sector, as exemplified by nomination of Sechin first to board of directors and then as president of the board at the annual assembly of shareholders on June 25th is but one example of the diversification strategy implemented by Sechin. In the same time he won control over RAO, he is preparing ROSNEFT to become an important competitor in the gas sector, and then to become a supplier of RAO. This is a proof that GAZPROM, the traditional Russian gas company, is now progressively loosing its influence. And, once again one could correlate this loss to the diminishing status of Dmitry Medvedev. In Russia business and politics, for the better and the worse, are going hand to hand.

Sechin has understood too what responsibility belongs to him. On July 16th, at the same time when President Putin was closely monitoring the most important exercise ever launched by the Russian armed forces (and with close cooperation with China) he promised to invest 30 USD billions in Eastern Siberia and Russian Far-East. By doing so he made ROSNEFT one of the most important actor in the Russian territorial development policy. Quite certainly this announcement was accurately timed to correspond with negotiations on the tax burden weighting on Russian Oil producer shoulders. Quite certainly too this was timed to please President Putin’s plans of developing the Far East, the only place where Russia status stands on a par with the former USSR. Nevertheless he took an important option in a decisively important field.

It is also well known that Sechin has for years advocated a so-called “Chinese course” for Russia and was strongly favouring the Chinese model with strong State-linked companies. This is giving an even greater weight to the promise of investing 30 USD billions in the Far East, a decision that appears to be linked to a change in Russia high strategy. This is consistent with economic views advocated by Sechin.

Would then Sechin become the most important man in Russia after Putin, mimicking the former Duc de Rohan motto “King I couldn’t, Duke I wouldn’t, I am Rohan”? Sechin’s path to supreme power is still currently undecided. May be after all would he prefers to stay in the shadows. Such a position could be more comfortable, avoiding then too much public exposure. But such a position could be at risk would the power of Putin be challenged. No pre-eminent business position is safe in Russia without a strong political “roof”. To stay in the shadows for Sechin implies he is sure of who is to exert the actual political power in the future.

Or may be he could prefer a more tangible position as Prime Minister, replacing then Dmitry Medvedev and entering the race for Putin’s succession. This would provide him for the long-term political protection he would need if he wants to safeguard his business position. However the guarantee of his current status actually depends on two things.

 

Igor Sechin’s main challenges

 

The first one would be ROSNEFT, and more generally the Oil sector, contribution to Russian modernization and development. Modernization is a decisive point for Putin and the Russian political elite who is looking at the USA and China with a mix of admiration, envy and resentment. Could Rosneft become both directly (through use of advanced technologies in exploration and exploitation) and indirectly (by fostering a large demand in other industrial branches of industry for advanced technologies) one of the engines in the development of innovation in Russia? This is the first challenge facing Igor Sechin. He has to consolidate ROSNEFT’s role in Russian economic development.

 

Figure 1

 
Inv-Russie

Data from GKS

 

This is a path advocated by academician Victor Ivanter, the Institute of Economic Forecasting director, who is advocating with its colleague for years a strategy of investment-pulled growth[1] where the sector of natural resources would play the dominant role in fostering innovation. In this economic scenario the main issue is investment. Actually, as one can see in figure 1, investments in oil and gas production have slightly trailed the total investment of Russia, as chemicals, electronic equipments and componants  and informatics have surpassed Russia’s total. Divergence in investment growth along industrial branches seems to be high in the recent times. This is just one example of the high level of technological heterogeneity, which is a key specific feature of the modern Russian economy. Economic policy has then to cope with the challenge of new industrialization which calls for the overcoming of technological gap experienced by a number of Russian industries and providing for intensive renewal of assets and organization of a significant number of new centers for innovative growth. The natural resources sector can and had to play a decisive role here.

 

The second one is subtler. Sechin is to make his ascent compatible with other’s ambition. He would be well advised to remember what happened to Nicolas Fouquet, King Louis the XIV surintendant aux finances or the equivalent of Minister of Finance and certainly the most powerful man after the King at the beginning of Louis the XIV reign. Fouquet was a man whose personal motto was Where he will ascend? His meteoric rise was succeeded by a dramatic fall as he attracted jealousy of too much people and in the end of the King himself. Most of Sechin’s own future depends on his capacity not to antagonize people during his ascension and to include and not exclude various groups. This is not just an issue of personal psychology (some people are actually loving conflicts and tends then to isolate themselves) but is too a programmatic issue. Sechin’s ascent is to avoid Fouquet’s trap if and only if it could be argued that what matters is not the fate of a man or a group of men but is a political and economic strategy for Russia. The building of a true strategy for political power, integrated into what has been already decided about Russia’s development till 2030, will be the key of the ultimate success, or failure, of Igor Sechin.

 

Sechin’s path to power in Russia is still plagued with uncertainties and enemies. But there are few doubts that he is to become one of the most influential leaders and may be a possible Putin successor. This is may be the real point. Putin failed in his previous attempt to find a successor. He could not fail the next, in 2018. After trying different people coming from the administration, he could then choose someone with a good track record both in administration and in business. Sechin would then appear as a quite viable candidate. But only if the man could provide guarantee of a true program for the next years.


[1] Ivanter V. (ed), THE NEW ECONOMIC POLICY, Institute for Economic Forecasting, mimeo June 2013, Moscow


Jacques Sapir

Ses travaux de chercheur se sont orientés dans trois dimensions, l’étude de l’économie russe et de la transition, l’analyse des crises financières et des recherches théoriques sur les institutions économiques et les interactions entre les comportements individuels. Il a poursuivi ses recherches à partir de 2000 sur les interactions entre les régimes de change, la structuration des systèmes financiers et les instabilités macroéconomiques. Depuis 2007 il s’est impliqué dans l’analyse de la crise financière actuelle, et en particulier dans la crise de la zone Euro.

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