Analysis: Money Talks At London's Russian Economic Forum
The ninth annual Russian Business Forum in London greeted Sergei Bogdanchikov, president of Russia's state-owned Rosneft oil company, with open arms on April 24, as he explained how his company will become the largest oil company in the world.
By Roman Kupchinsky
April 25, 2006
Playing to his audience of potential foreign investors and prominent Russian business representatives, Bogdanchikov said outsiders are welcome to share in Rosneft's coming riches by participating in the company's initial public offering (IPO) this summer. What Bogdanchikov failed to mention was that a great deal of the company's good fortune is due to its takeover of Yukos's main production unit, Yuganskneftegaz.
Prior to the takeover of Yuganskneftegaz, Rosneft's 2004 production of oil did not top 430,000 barrels per day. It was only after the dismantling of Yukos that good fortune smiled on Rosneft and production rose to 1.5 million barrels per day.
Bogdanchikov avoided mention of how much of his company will be floated in the upcoming IPO. There had been speculation that 49 percent of Rosneft being offered up; however, current estimates are more in the range of one-third of the company.
Damage Control
The economic forum also saw Aleksandr Medvedev, head of Gazeksport, Gazprom's export arm, attempting to undo the damage caused last month when Gazprom threatened to redirect gas supplies away from Europe if its international ambitions met resistance. The company's official statement threatened to focus its efforts on Asia if Europe refused to allow Gazprom entry into its gas-distribution markets. The warning came after British competition regulators proposed changing takeover rules amid market speculation that Gazprom might bid for the country's largest gas distributor, Centrica.
Medvedev told "The Times" of London on April 24 that the recent uproar can be characterized as an "uneducated" response.
New Threats
The only sour note that has come during the Russian Economic Forum did not originate in London. It was a statement issued in "Nezavisimaya gazeta" on April 24 by Semyon Vainshtok, the head of the Russian oil-pipeline monopoly Transneft. Vainshtok told the Russian daily that once a planned pipeline to China is completed, it will make economic sense to take some of the Russian oil currently going to Europe and redirect it to China. "We have oversupplied Europe with oil," Vainshtok said. "Every economics textbook says that when there is excess supply, prices fall."
Despite the implications such a development could have on Europe's future energy supply, the European Union appeared unfazed. "It's more or less the same thing that we said [about] the comments [from] Gazprom," European Commission spokesman Ferran Tarradellas Espuny said on April 25. "In an open market, it's perfectly logical that suppliers look for different customers, [and] we are looking for different suppliers. So, if they want to do so, they are free [to do so]."