Inside the Gazprom management team

by Simon Pirani

As Gazprom gears up for its merger with Rosneft, expected later this year, ceo Aleksei Miller is centralising its management in the image of the Kremlin administration to which he owes his loyalty.

Just as president Vladimir Putin has put his own associates from St Petersburg, including Miller, into key positions in government and the economy, so Miller has moved Petersburgers into top posts at Gazprom. Many of those he rushed into position after his own appointment in 2001 have already been replaced by newer faces, such as Aleksandr Medvedev, who was this month put in charge of Gazprom’s export business.

Miller’s much-overhauled management team includes representatives of both the dominant groups in Putin’s administration – the economic liberals and the so-called “siloviki” (men of force, i.e. former security services officials with a generally statist outlook).

The shape, attitudes and internal contradictions of these two factions – and Putin’s strategy of balancing between them – form an important part of the background to the Gazprom-Rosneft merger.

The economic liberals, represented in government by finance minister Aleksei Kudrin and economic development minister German Gref, have been entrusted by Putin to achieve his target of doubling Russia’s GDP. He has demonstrably backed them on issues such as financial management (early repayment of Russia’s Paris Club debt) and energy sector reform. Dmitry Medvedev, head of the presidential administration and chairman of Gazprom, is thought to be aligned to their pro-market views.

The “siloviki”, who include prime minister Mikhail Fradkov and defence minister Sergei Ivanov, broadly favour a more state-led industrial policy and state control over strategic assets. Their key representative at the Kremlin is Igor Sechin, Medvedev’s deputy and recently appointed chairman of Rosneft.

But the “siloviki” are not only a political grouping. The term is used to describe the large number of former security services officers who have taken up administrative and government posts since Putin, himself a former KGB officer, was elected in 2000. Sociological research last year showed that they form a large minority among deputy ministers and a considerable majority in the offices of the president’s seven regional offices.

Most political analysts agree that the desire to return strategic oil and gas assets to the state sector – and, consequently, the destruction of Yukos oil company by the arrest of its key owners and presentation of $25 billion in back tax bills – stemmed from the “siloviki”. And while they may not have thought up the idea of turning Gazprom into a might Russian version of Aramco, capable of fighting Russia’s corner on the world stage, they surely welcome it.

The relatively opaque character of government in Putin’s Russia means that it is difficult to determine the motives for decisions. Some observers thought that the “siloviki” attacked Yukos for political reasons, i.e. to strengthen the state’s hand; others emphasised that a simple turf war over assets may have been a more logical interpretation.

The public disagreements that surfaced between Gazprom’s Aleksei Miller and Rosneft boss Sergei Bogdanchikov, when the two companies announced their merger in mid-March, raised similar doubts. Miller announced, with Bogdanchikov sitting alongside him, that 100% of Rosneft would be taken into Gazprom and that Yuganskneftegaz, once Yukos’s largest production unit and now Rosneft’s property, would be spun off into a separate state-controlled company.

Two days later Rosneft put out a statement saying that it would remain legally and financially independent of Gazprom, and keep all the assets now under its control. After another few days, these statements were rescinded – and three Rosneft vice-presidents, including Iurii Matveev, whose responsibilities included the press office and public statements, left the company.

It is now widely expected that Rosneft boss Bogdanchikov will take charge of Yuganskneftegaz and that Rosneft’s other assets – a collection of oil fields in different parts of Russia, and shares in two of the Sakhalin projects – will be merged into Gazprom. Industry analysts say this is an example of how the schizophrenic state of Putin’s administration is damaging the companies in its charge.

Jonathan Stern, director of gas research at the Oxford Institute of Energy Studies, said: “We tend to assume that Putin has absolute power. The confusion surrounding the merger is a reminder that this is not the case, and that he is not in complete control of the various groupings that support him. He appears to want to make Gazprom into a Russian Exxon, and while this may still happen, it will not happen as quickly as he might have hoped.

“There are outstanding legal issues surrounding Yuganskneftegaz: challenges to its sale and loan guarantees it issued for Yukos. This was the reason for separating it off. But if Mr Bogdanchikov now takes charge of that company, we will be in the strange situation where Gazprom will take over the other Rosneft assets, but without experienced oil industry people to run them.”

While the management of Rosneft’s assets may suffer as a result of the Bogdanchikov-Miller quarrel, the overall management of Gazprom goes into the merger more coherent and homogeneous than ever. Each appointment made by Miller in the last two years has strengthened the representation of his former colleagues from St Petersburg in the management, who have replaced not only almost all the remaining survivors of the chaotic pre-Miller era but also many of his own early appointments.

Aleksandr Medvedev, appointed on 7 April as deputy ceo in charge of the export business, to replace Yuri Komarov, is the most recent. In the early 1990s he worked in Donau Bank, the former Soviet trade bank based in Vienna and subsequently in IMAG, an Austrian finance company that advised Russian businesses on raising money in the west. Medvedev, who Russian newspapers claim is strongly backed by Putin, retains the job he has held since 2002 as head of Gazeksport. There he replaced another Miller appointee, Oleg Sienko, who was in turn brought in after the dismissal of Yuri Viakhirev, son of former ceo Rem Viakhirev.

Three other new deputy ceos have been appointed in the past two years:

Bullet point  Aleksandr Kozlov, who arrived at Gazprom in February from the presidential administration, where he was in charge of transport and supply, and is connected to the security services through his status as a lieutenant-colonel in reserve of the federal security service (FSB, i.e. the former KGB);

Bullet point  Sergei Ushakov, who came to Gazprom two years ago after 18 years’ service in the FSB in St Petersburg, and took charge of Gazprom’s security department from Sergei Lukash, who had been appointed by Miller just two years before; and

Bullet point  Andrei Kruglov, who took over in April last year as Gazprom’s most cfo, and had studied in Leningrad and after a spell in 1994-95 at BNP Dresdner bank worked in the department of foreign economic relations of the St Petersburg mayor’s office, at the same time as both Miller and Putin. He replaced Boris Iurlov, who in 2002 was brought from a job in the presidential administration to take charge of Gazprom’s finances.

Gazprom’s other deputy ceos are Aleksandr Ananenkov, the production veteran who remains in charge of the production division, liberal marketeer Aleksandr Riazanov, who is in charge of marketing and processing gas and chief accountant Elena Vasilievna, a typical Petersburger who in the late 1990s worked as chief accountant under Miller at both the St Petersburg port and the Baltic Pipeline System.

Medvedev, Kruglov and Ushakov all replaced those appointed by Miller in his first year, when, with Putin’s support, he was stamping his authority on Gazprom and easing out those who had tolerated corruption under former ceo Rem Viakhirev. Now this “first generation” of Miller appointees is giving way to his “own” people. The trend is observable in other recent appointments to the management board, including:

Bullet point  Kirill Seleznev, head of the department of marketing and processing of gas and liquid hydrocarbons and general director of the domestic gas sales company Mezhregiongaz, who had worked at the St Petersburg port with Putin and moved to Gazprom in 2001. Russian newspaper reports say that Seleznev was put in charge of Mezhregiongaz in March 2003 after president Putin intervened in a dispute between its former boss Nikolai Gornovskii and Miller. Gornovskii, a protégé of Sergei Lukash, had sought too much independence for Mezhregiongaz – and both he and Lukash lost their jobs as a result of the clash.

Bullet point  Valerii Golubev, head of the department of investment and construction and general director of Gazprom’s procurement subsidiary Gazkomplektimpeks. A Petersburger, KGB officer for 12 years up to 1991 and in 2002-03 a member of the Federation Council (upper house of the Russian parliament), Golubev took over from Vladimir Leviev, another Miller appointee who was brought in to Gazkomplektimpeks in 2002 to deal with waste and corruption.

Bullet point  Olga Pavlova, a Petersburger who in 2003 replaced another Miller appointee, Aleksandr Krasnenkov, at the head of Gazprom’s property and corporate relations department. Another Petersburger recently brought into the department, Mikhail Sirotkin, recently replaced Boris Nikitin as the boss of Rosshelf, the Gazprom-Rosneft joint venture that has a controlling interest in the Prirazlomnoe project in the Arctic Sea.

The same centralising trend is evident in the appointment in 2003 of Aleksandr Diukov, who worked with Miller at the St Petersburg port, as the head of Sibur, Gazprom’s petrochemicals subsidiary, and the appointment in 2002 of Andrei Akimov, who worked in Vienna with Aleksandr Medvedev, as chairman of Gazprombank.

Both Miller and presidential aide Igor Shuvalov have indicated this month that the merger with Rosneft, and the removal of the “ring fence” around Gazprom’s domestically-quoted shares, will be completed this summer. The changed share structure will be a source of excitement for institutional investors. But for the gas industry Gazprom’s enhanced role as a national energy champion, and how its new generation of managers develop it, will be the focus of attention.

Members of the Gazprom management board (MB)
In approximate order of seniority

Name Job Date joined
mgmt board
Peters-
burger*
Sec. serv.* Gas ind.*
Aleksei Miller Chairman of MB, member of the board of directors 2001 Yes    
Aleksandr Ananenkov Deputy chairman of MB, member of the board of directors 2001     Yes
Aleksandr Riazanov Deputy chairman of MB 2001     Yes
Aleksandr Kozlov Deputy chairman of MB 2005   Yes  
Andrei Kruglov Deputy chairman of MB, head of financial-economic department (cfo) 2003 Yes    
Sergei Ushakov Deputy chairman of MB, head of Gazprom security service 2003 Yes Yes  
Aleksandr Medvedev Acting deputy chairman of MB, general director of Gazeksport 2005      
Elena Vasilievna Deputy chairman of MB, chief accountant 2001 Yes    
Mikhail Sereda Member of MB, chief of staff of MB 2002 Yes    
Bogdan Budzuliak Member of MB, head of department of transport and underground storage 1991     Yes
Valerii Golubev Member of MB, head of department of investment and construction, gen. dir. of Gazkomplektimpeks 2003 Yes Yes  
Kirill Seleznev Member of MB, head of the dept of marketing and processing, gen. dir. of Mezhregiongaz 2004 Yes    
Viktor Iliushin Member of MB, head of the department of regional relations 1997      
Vasilii Podiuk Member of MB, head of the department of production of gas, condensate and oil 1997     Yes
Vlada Rusakova Member of MB, head of the department of strategic development 2003     Yes
Olga Pavlova Member of MB, head of the department of property and corporate relations 2003 Yes    
Konstantin Chuichenko Member of MB, head of the legal department 2002 Yes Yes  

MB = management board

* Petersburger = educated and worked in St Petersburg. All worked directly with Miller either at the St Petersburg mayor’s office, the Petersburg port or the Baltic Pipeline system, except for Ushakov, Golubev and Chuichenko, who all worked in the security services.
Sec. serv. = links to, or career in, the security services.
Gas ind. = Career in the gas industry.

A version of this article appeared in Gas Matters magazine, April 2005.
Posted May 2005; © 2005 Simon Pirani

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