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Sechin, Maven of Competition

sechin070908.jpgWe’re all quite familiar with Igor Sechin, chairman of Rosneft, Deputy Prime Minister, and silovik extraordinaire, but few would describe him as a maven of open competition in Russia’s energy sector. Yet that is exactly what he appears to be doing, as Kommersant reported this past weekend that he has soared in above the law “ordered” the Federal Anti-Monopoly Service and Gazprom to allow indiscriminate third-party access to their monopoly on pipeline exports – namely, access for his own company. To call such a move “a conflict of interest” or “abuse of office” wouldn’t really come close to capturing the incestuous nature of Russia’s political environment and energy sector, as Sechin could personally stand to see his bank account swell with billions should Rosneft begin exporting natural gas to Europe. But what will happen to the Kremlin’s political monopoly on the pipelines? Affording them the ability to cut the taps to Western-leaning governments in the near abroad, and freeze out foreign investment projects they wish acquire?

Let’s make no mistake here: open competition and third-party access to Russia’s pipeline infrastructure is of course very positive for consumers and independent producers, who have suffered manipulated pricing since the Russian parliament passed a law granting exclusive natural gas exporting rights to Gazprom back in 2006 (one of the crowning achievements set forth in Vladimir Putin’s plagiarized dissertation).The key question therefore is whether or not Sechin is talking about genuine non-discriminatory access to the pipelines, or just for Rosneft – which would preserve the Kremlin’s political influence over energy supplies. Indeed, when Sechin made the announcement, executives were present from TNK-BP, Nortgaz, NOVATEK, ESN Group and KES Holding – who would all eagerly embrace any opportunity to get more capacity in the pipelines heading to Europe, which would conceivable drive prices down. I would also note that for Russia to strike down this monopoly by law, their chances of achieving fair treatment from the European Commission would be greatly enhanced.However, let’s not hold our breath yet. A representative from the FAS told Kommersant that the best way for these third parties to theoretically gain access to pipeline capacity would be through an auction – and we haven’t seen an honest bidding process in Russian energy in many years now. Furthermore, it would be hard to take Sechin’s ideological push for open competition with any level of sincerity given the aggressive interference he laid down on Anatoly Chubais’s efforts to privatize UES. Igor Sechin is not Alexei Kudrin (in fact, he allegedly tried to get this fiscal hawk thrown in jail. Anybody heard from Sergei Storchak recently?)I fear that Sechin’s campaign to chip away at Gazprom’s monopoly power (following his defeat with UES) may be related to ongoing tensions related to the clan feuds, and could seek to weaken the position of Dmitry Medvedev and the so-called liberal factions within the Kremlin. Nevertheless, if this infighting leads to genuine opening of the pipelines, everybody wins.