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Celebrating Sechin

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In about an hour, we are expecting a foregone conclusion during an award ceremony to crown deputy prime minister Igor Sechin as Russia’s best CEO – an event not lacking in irony.

What must be one of the most unusual awards around is given out by a Russian organization known as the Investor Protection Association [“Association for the Protection of the Rights of Investors” in Russian]. This organization of domestic and foreign asset management companies working in Russia has been around since 2000, and includes such major players as Deutsche Bank and Troika Dialog among its 26 members. It has been holding an annual awards ceremony every December since 2002, in categories such as “Best Investor Relations” and “Best Dividend Policy”, and, confusingly, “Poorest Corporate Governance”.

Back in the early years, before the arrest of Mikhail Khodorkovskyand the dismantlement of Yukos Oil Company, Yukos and Khodorkovsky wereroutinely nominated for a plethora of awards, and won quite a few ofthem.

The Association’s website has easy-to-find links to pages describingeach of these annual ceremonies, but strangely, for most of the years,there is just a list of the categories, sometimes of the nominees aswell, but the actual winners are not given. Also, curiously, the photosof the winners from the early years don’t include any faces from Yukos.One can not help but get the impression that in time-honored Sovietfashion, the website has been altered for political correctness in thewake of the Yukos affair, to remove all traces of the company. As ourRussia correspondent Grigory Pasko wrote in one of his recent articleson this blog, “The past in Russia is unpredictable”.

Indeed, one has to wonder if the Association hasn’t developed a new,uniquely Russian (“sovereign”) definition of its stated goal of”uniting investors’ efforts aimed at protection of their rights andimprovement of the corporate governance in Russia”, and has now decidedthat the best way to protect investors’ rights and improve corporategovernance in a country where the government itself is rapidly becominga corporation is to toady up to the power, flattering key governmentofficials cum captains of industry by giving them awards. That way,supposedly, one reduces the chances that the rights of theAssociation’s members will be trampled on, and what is that if not”protecting investors’ rights”? And, a government/corporate officialwho has just been given an award, it is hoped, may look more kindly onnon-state shareholders and their interests, thereby “improvingcorporate governance”.

Seem far-fetched? Read on. One of the most recent award categoriesis “Best Chairman of a Board of Directors”. The Association’s ownChairman of the Board, Alexander Branis, refuses to disclose thecriteria by which the Association chooses a winner. But in 2006, thefirst year this award was given, it was won by the Chairman of theBoard of Gazprom, one Dmitry Medvedev. Last year (one of politicalchange and uncertainty, featuring reshuffles at the top of the powerpyramid as Vladimir Putin moved from the Kremlin to the White House, aswell as power struggles among various siloviki clans) the Associationwas unable to agree on a winner. In fact, the website doesn’t even havea link to the 2007 awards.

This year’s nominees are not listed on the website either, but areknown to include Valery Graifer of LUKoil and a certain Igor Sechin,Chairman of the Board of Rosneft, and also, coincidentally, a veryprominent figure in Vladimir Putin’s entourage, currently a DeputyPrime Minister. Three guesses as to who will win.

Igor Sechin, in case you haven’t heard, is a notoriously powerful former KGB agentvery close to Putin, who is widely regarded as the mastermind behindthe destruction of Yukos and the subsequent gobbling up of its assetsby Rosneft. One has to admit that these moves certainly did a greatdeal to improve the lot of what had been an unimpressive mid-sized oilcompany until then. It would be hard to find a Chairman of the Boardanywhere in the world who has done so much for his company!

And Sechin has continued his impressive work for the good ofRosneft, using all of his Kremlin clout (or, as it’s known in Russia,”the administrative resource”) to further its corporate interests. On arecent trip to Venezuela, for example, Deputy Prime Minister IgorSechin discussed a possible joint oil development project in theOrinoco basin which, if it comes to fruition, will benefit Rosneft, andits Chairman Igor Sechin will be able to take all the credit for that.

The name of the game in Russian business today is “proximity topower”. The closer you are to the power, the fewer hassles you willneed to deal with, and the more lucrative contracts you will win. In aclimate like that, is it any wonder that the “Best Chairman of a Boardof Directors” is one who not only is close to the power, but is rightin the thick of it? Such a Chairman can be very good indeed for hiscorporation – whether it’s making sure rival factions within the powerdon’t start nipping at its heels, or arranging for it to have theinside track on a lucrative deal, or getting local authorities to turna blind eye to something illegal that nevertheless is good for thecorporation, or keeping the tax and environmental inspectors and otherassorted and sundry regulatory wolves at bay.

And even if Igor Sechin isn’t the best in Russia at all this(although from what we’ve seen, our vote’s with him), it can’t possiblyhurt the Investor Protection Association to give him the award anyway -it’s always better when someone who wields such a huge administrativeresource is positively, not negatively, inclined towards you, after all.

In an article immediately following this post, Grigory Pasko writes that not only isthe past in Russia unpredictable, but that the future is verypredictable indeed. As if to illustrate this unique phenomenon, Grigorywas so sure that Igor Sechin would win the Investor ProtectionAssociation’s “Best Chairman of a Board of Directors” award for 2008that he filed his own report on the ceremony with us three days beforethe event!

Photo: Russian Vice-PM Igor Sechin (C) takes part in a meeting in Caracas on September 16, 2008. Sechin is in Venezuela to sign energy, industrial and military cooperation agreements. (AFP/Getty Images)