Russia Puts an End to Fake Auctions

Some good news out of Russia: no longer will they hold those famously non-transparent bidding processes with energy companies to award oil/gas exploration and production licenses, which usually ended with either Gazprom or Rosneft winning, and sometimes with a multinational owing a big political favor. Instead, why not just cut to the chase, and have the silovik-in-chief just make a private, discretionary choice on his own? That’s what has happened with Igor Sechin recently, and Latynina is one the case with a column that speaks for itself.

Igor Sechin: The Great Arctic Conqueror By Yulia Latynina The vast oil deposits located in what the Kremlin believes to be an extension of Russia’s continental shelf in the Arctic will be distributed solely at the government’s discretion, without holding the usual auctions or tenders. In a meeting on Friday with Deputy Prime Minister Igor Sechin, who oversees the energy sector, President Dmitry Medvedev explained the decision, saying, “This was done consciously to ensure rational use of this national wealth.”

Is he saying that only the imperialists allocate the rights to develop oil deposits through competitive auctions, whereas the Kremlin lets Sechin decide who gets what? Is Sechin the sole guarantor of Russia’s “rational use of its national wealth”?Prior to this announcement, Russia had been trying for a year to prove that the Lomonosov ridge, on the bottom of the Arctic, is a logical extension of the Siberian plain. General Vladimir Shamanov even said in a June 24 interview in Krasnaya Zvezda, the country’s military newspaper, that the military is prepared to fight any country that disputes Russia’s rights to the continental shelf.So we won’t hold a tender, but we are willing to go to war. Naval warships will repel the forces of any country that contests Sechin’s right to exploit the oil deposits on the continental shelf.In January, when Prime Minister Viktor Zubkov told the then-prosecutor general to find out what is going on with country’s drilling activities in the Arctic, it was discovered that the country’s only functioning Arctic drilling rigs, the Murmansk and the Valentin Shashin, had been rented out to a Norwegian drilling company at one-fourth of the market price. What a great example of the country’s “rational use of its national wealth”!Things are no better with the military. During Soviet times, the country’s nuclear submarines patrolled the Arctic region. Strategically, it was the most favorable location from which Moscow could launch a possible nuclear strike against the United States; a missile launch from the Arctic would have the shortest possible flight time to U.S. territory.Maintaining a military presence in the Arctic, however, requires a complex and very expensive infrastructure, including a sophisticated communications system that can function reliably despite severe magnetic interference, and the ability to accurately predict bad weather conditions.But the Soviet Union had all that. My colleague and specialist on the Russian military, Alexander Golts, once pointed out to me that, “If anybody thinks we were on [the Arctic island of] Spitsbergen solely to mine coal, they should take a look at the weather station and landing strip there.” But since it was impossible to rent out our Spitsbergen assets for one-fourth of their market value to maximize “the rational use of its national wealth,” the whole installation fell into disrepair.It is, therefore, unclear what military resources Shamanov will have at his disposal to defend Sechin’s claims to the rich Arctic natural resources.The most interesting part of this story is that, although there might really be large oil and gas reserves under the Arctic, Russia, unfortunately, is unable to mine those deposits without the help of foreign expertise and equipment. We can’t even tap the huge Shtokman gas field in the Barents Sea by ourselves.But it is hard to imagine Russia entering joint Arctic exploration and development projects with foreign companies when our leaders are constantly shaking our fists at them and sending the country’s nuclear submarines to patrol the Arctic waters.Or perhaps the Kremlin is planning to pour a couple billion dollars into the creation of an exotic new Russian hybrid — half-nuclear sub and half-underwater drilling platform. Not a bad idea at all! And I have got a perfect name for this one-of-a-kind vessel — “The Igor Sechin.” On its side we could write: “For the optimal use of Russia’s natural resources.”