Igor Sechin
and Mixing Oil with Politics
Igor Ivanovich Sechin is a Russian statesman and oil magnate. Although he is often named as one of President Vladimir Putin’s closest allies, he is also sometimes described as a thorn in Putin’s side. However, regardless of how his relationship to the president is described, nearly all commentators agree that he is one of the most ambitious and powerful men in Russian politics, particularly with regard to guiding massive business deals involving state funds and state corporations.
About eight years Putin’s junior, he should be considered a top pick for those looking for current political players who might replace Putin should he retire. Although Sechin’s intense desire to protect his private life might make him shy from taking the top post, his wide network of political and economic influence make him a viable and likely candidate. Sechin has also shown a ruthless ambition to expand his personal power and influence. At this stage of his career, considering the amount of power and influence he already holds and the possibility of a future President less deferential to him, it is hard to imagine what other position could further elevate him in those regards.
Early Life, Education, and Employment
Sechin was born in Leningrad on September 7, 1970 to parents who both worked in a local steel factory. He developed an early interest in languages, studying French throughout high school and picking up Portuguese after entering Leningrad State University in 1977.
He put his college career on hold after being drafted to work as a translator in Mozambique, an African country where Portuguese is the official language. There, the Soviet Union was assisting the Mozambique Liberation Front in that country’s civil war. He returned to Leningrad two years later and completed his degree in 1984, after which he enlisted in the Armed Forces. He served two years in Angola, another Portuguese-speaking African country.
Sechin returned to Leningrad State University in 1986 to work in the foreign department—preparing candidates for study abroad. Allowing citizens to go abroad was considered a politically sensitive act under the USSR and one that was controlled by the state through a system of exit visas. Given this restriction and the fact that Sechin likely translated politically sensitive material while serving Soviet interests in Africa, reports that he developed ties to the KGB, albeit unconfirmed, seem highly probable. Similarly, rumors that he maintained his contacts over the years, from the KGB through to its successor organization, the FSB, are also likely true. A common phrase from agents, quoted publically by Putin himself, is that “there is no such thing as a former KGB man.”
In 1988, under Perestroika, the USSR tried to recruit more foreign investment and open its economy. Sechin was brought in to lead Leningrad’s sister-cities relationship with Rio de Janiero, and later Barcelona and Milan as well, in order to build economic ties. In 1991, Putin was appointed to head the Foreign Relations Committee for St. Petersburg, where he eventually brought Sechin into his department.
While working for the city, Sechin completed a Ph.D. in economics in 1998 with the St. Petersburg Mining Institute. His dissertation focused on the oil industry, arguing that state control, consolidation, and political power should be considered above market forces such as profit. Similarly, Putin’s Ph.D. dissertation also argued for using resource extraction industries to further state interests and power. Thus, it can be argued that the two men have long been philosophically aligned in arguing for a strong state presence in Russia’s resource extraction industry.
Sechin was one of many St. Petersburg officials to follow Putin to the Kremlin after Putin was named to the powerful Property Management Department in Moscow. Sechin also followed Putin to the Main Control Directorate under President Yeltsin, and finally into the Presidential Administration under Putin. From 1999 until 2008 (Putin’s first two terms), Sechin served as Deputy Head of the Presidential Administration. In this role, he held an office directly adjacent to Putin’s and oversaw and screened all official visits to the President.
Following the inauguration of Dmitry Medvedev as President of Russia and Putin’s appointment as Prime Minister, Sechin became Putin’s Deputy Prime Minister. Within this role, his activity in directing economic policy through various organizations and state companies expanded rapidly. He opened negotiations with OPEC and, although he kept Russia from joining the organization and strongly opposed oil production caps, he nonetheless developed working ties with the group. During this period, Putin also placed Sechin as Chairman of the Board of Russia’s Consolidated Shipbuilding Corporation, where he assisted with a large shipbuilding contract for Mistral class amphibious assault ships to France.
Largely considered a secretive and private man, Sechin took on a slightly more public persona in this new role, giving some of his first interviews. Nonetheless, he remained a largely obscure figure in Russian public life.
Rosneft
In July 2003, Mikhail Khodorkovsky, the CEO of private oil giant Yukos was arrested on fraud and tax evasion charges. The case around Khodorkovsky is complicated. Given the cut-throat and legally questionable business environment that Russia operated under in the 1990s, it is unlikely that Khodorkovsky or anyone else could have built a massive business empire with completely clean hands. However, few also doubt that his prosecution was, in part, politically motivated. Khodorkovsky was, at the time, Russia’s wealthiest man and he aligned himself with opposition parties and publically criticized the government. Meanwhile, less politically vocal oligarchs—who likely could have been prosecuted under similar charges—were left untouched by law enforcement.
About a year after his arrest, Khodorkovsky’s company was falling into bankruptcy and its assets were being prepared for auction. At about the same time, Sechin, still a member of the Presidential Administration, became chairman of the board for Rosneft, a state-controlled oil company. Rosneft acquired Yukos’ main assets at a steep discount through another company, the Baikal Finance Group, which had been acquired by Rosneft shortly before the auction and was liquidated immediately afterwards. Only one other bidder participated in the auction. Yukos investors and management responded to these actions by suing for restitution of lost shareholder value in the Permanent Court of Arbitration at The Hague in 2007. However, although the court awarded them $50 billion in damages, the District Court of The Hague overruled the decision on the basis that the Court of Arbitration did not have jurisdiction.
In April of 2011, on orders from then-President Medvedev, Sechin stepped down as chairman of Rosneft. The orders, which demanded the removal of all ministers from state companies, were meant to increase transparency and reduce state involvement in the economy. The move, at the time, was seen as a possible rift opening between Medvedev and Putin, although that seems to have not played out. In 2012, after Putin’s return to the presidency, Sechin stepped down as Deputy Prime Minister and moved back to Rosneft, now appointed by Putin as its president. This marked a new era of sorts for Sechin, removing him from the government and allowing him to operate with official independence from Putin. After this time, Sechin’s considerable gains in power and influence were closely linked to Rosneft’s aggressive expansion. He has also been directly marked by the controversial nature of many of the deals that have fueled that expansion.
In 2012, Sechin initiated the buy out of TNK-BP, a large oil conglomerate that ran into trouble after its foreign investors, led by British Petroleum, could not agree on the direction of the company with its Russian investors. Because the investment agreement had created a 50/50 partnership, the stalemate quickly drove the company into the ground. TNK-BP, then Russia’s third largest oil company, was wholly acquired by Rosneft in 2013, purchased in large part by awarding BP 18.5 percent stock in Rosneft (19.75 percent today). This acquisition brought Rosneft into control of roughly 40% of Russia’s oil production. Rosneft also expanded its interests internationally, striking deals, for instance, with Venezuela’s state oil company for a 40 percent stake in an oil production venture in the Orinoco river basin.
Rosneft’s buying spree was also partly funded by some $30 billion dollars borrowed in foreign currency from foreign banks. In 2014, the value of the ruble dropped as Russia faced an acute financial crisis and the central bank decided to the let the ruble float. Rosneft’s debt became untenable as its ruble value skyrocketed. This problem was only exacerbated by the fact that many of Rosneft’s acquisitions, in line with Sechin’s philosophies, had been conducted in order to increase market share and gain political clout rather than to boost profitability.
Sechin was left scrambling to keep Rosneft afloat. He initially decided to issue ruble bonds while the financial crisis was still underway. Russian Central Bank Chairwoman Elvira Nabiullina, however, pointed out that this would only worsen the ruble’s decline and impact her inflation targets. After a public scolding from Nabiullina and a closed-door meeting between the two, Sechin was forced to abandon his strategy. In February of 2015, Putin also publically criticized the oil magnate for asking for a massive government bailout, a request that, in Putin’s opinion, placed Sechin’s company interests above the health of the entire economy. Putin publically favored selling state holdings in Rosneft to shore up Russia’s budget deficit and bring in new investment.
Sechin’s public falling-out with Putin continued as the Bashneft deal unfolded—involving yet another oil giant. The Russian government largely acquired Bashneft after Vladimir Yevtushenkov, the chairman of the financial firm Sistema, was arrested on corruption charges related to Sistema’s formation of Bashneft. This scandal sent the value of the company down and called into question its continued existence. Thus, although the government acquired 72% of the company’s shares, it announced that it would sell off its stakes.
Although Russian law forbids state-owned companies from participating in privatization deals, Rosneft managed to skirt this rule because of its indirect ownership by the state through a government-owned parent company, Rosneftegaz. Rosneft, despite criticism from the Russian Finance Ministry and the Central Bank, thus placed its bid on the firm. Although Putin also publically criticized the move, he also backed Rosneft’s right to do it. Ultimately, Rosneft acquired Bashneft without competition in the auction.
Publically, Sechin described the deal as a great opportunity to increase Rosneft’s share price prior to a planned privatization of an additional 19.5 percent of the company towards the end of 2016. Some commentators hypothesized that Putin eventually allowed the acquisition in exchange for Sechin’s agreement to sell the Rosneft shares. In December, that sale netted slightly over $11 billion for the state from a joint sale to the Swiss firm Glencore and the Qatar Investment Authority. This deal has also been criticized, however, for its opaqueness and apparently large role that Russian state-owned banks had in financing the purchase of the state-owned oil company.
Yevtushenkov, the arrested Sistema head, was later cleared of all charges in 2016 and his firm Sistema was awarded $1.1 billion in damages stemming from the deal. The sale of Bashneft, however, netted $5.3 billion for the Russian state, which although beneficial for the state’s budget deficit, was a significant loss for Sistema overall.
Sechin has also recently filed lawsuits against several prominent Russian newspapers in another recent controversy. He argued that Vedomosti, Novaya Gazeta, and RBC violated his privacy rights by publishing stories regarding his personal assets. Sechin won libel suits against Vedomosti and Novaya Gazeta in 2016. Both are challenging the rulings. The RBC case, however, is still currently outstanding.
Sechin has often clashed with more liberal elements of Russia’s ruling elite, including Prime Minister Dimitri Medvedev and Central Bank head Elvira Nabiullina. However, despite these conflicts and despite the crises that both Sechin and Rosneft faced in 2014-2015, he remains one of Russia’s most powerful conservative forces. Although he has not served directly in the government for several years, his personal contacts, including his relationship with President Putin, remain strong. If a change in Russia’s leadership were to happen, Sechin could easily be considered a contender for the position. But barring such a promotion, at very least, it is safe to assume that he will fight aggressively to maintain a position of considerable power under any new administration.
