Rosneft President Igor Sechin ‘Russia Didn’t Initiate the Ukraine Crisis’

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Interview Conducted by and

Igor Sechin, head of the oil giant Rosneft, is considered by many to be the second most powerful man in Russia. In an interview, he speaks with SPIEGEL about natural gas deliveries to Europe, the Ukraine crisis and the damage caused by economic sanctions.

His adversaries refer to him as Darth Vader; his admirers call him the energy czar. His power, though, is uncontested. And Igor Sechin, the director of Rosneft, the world’s largest listed oil company, is also reclusive. He only seldom appears before the public and the press.

But when Sechin, 53, enters the room for his interview with SPIEGEL, he is in a cheerful mood, immediately handing over his business card which reads: “No Name, No Company, No Address.”

The text on the card is his commentary on the sanctions imposed by the West on Russia and on leading figures in the country, such as Sechin himself. He is no longer permitted to travel to the US and Sechin has become persona non grata in the West due to the ongoing war in Ukraine.

A thickset man with a degree in Romance languages, Sechin is considered to be one of the most powerful people behind Russian President Vladimir Putin in the complicated Kremlin power structures. The two have known each other since the 1990s, having worked together at the time in the St. Petersburg city government. As Putin rose to power, he pulled Sechin up with him, first as deputy chief of staff during Putin’s first stint as president and then as deputy prime minister.

Within a decade, Sechin created a company that controls more oil and natural gas reserves than the energy giant ExxonMobil. Each day, Rosneft produces 4.2 million barrels of oil, almost 5 percent of global consumption. The company’s headquarters, a Czarist palace across the Moscow River from the Kremlin, make Rosneft’s place in the Russian hierarchy clear. Behind the facade, though, the image is far less pompous, with cafeteria odors wafting through white-tiled hallways and offices numbered like rooms in a cheap hotel.

A map of all of Rosneft’s drill sites in the former Soviet Union hangs on the wall of the conference room. The trapezoidal conference table narrows at one end, where a green leather armchair occupies the place of honor. Sechin, though, chooses a less ostentatious perch.


SPIEGEL: Igor Ivanovich, the US government has placed you on the sanctions list and has blocked Rosneft from receiving oil drilling technology from the West. How bothered are you by the fact that you are no longer welcome in the US and Europe?

Sechin: Neither I nor my company have anything to do with the crisis in Ukraine. As such, there is no foundation for the sanctions against me and Rosneft. They represent a violation of international law. Rosneft is an international corporation with stockholders in America, Europe and Asia. After the Russian state, BP is our biggest stakeholder with a 20 percent holding. As such, the sanctions also affect our Western partners. I find it curious that Rosneft is on this list even though we work more closely together with American and European companies than any other Russian firm.

SPIEGEL: How painful are the sanctions against Rosneft and Russia?

Sechin: The oil reserves that we are able to tap with the means available to us today are enough for 20 years. The sanctions will not prevent us from fulfilling our supply contracts. The technology affected by the sanctions is related to future projects. Incidentally, I would like to quote an expert. Juan Zarate, who was an advisor to President George W. Bush, writes in his book “Treasury’s War” that America is waging a new kind of war. It is being waged without military attacks, preferring instead to make opponents suffer financially.

SPIEGEL: Are you trying to say that America has declared such a war on Russia in response to the Ukraine conflict?

Sechin: I’m just quoting him. Early on, the American geostrategist Zbigniew Brzenzinski warned Europe against turning to Moscow. He was referring to the natural gas pipeline deals between Russia and Germany. He wrote that the US should not tolerate a geopolitically united Europe that might challenge America. That would happen, he wrote, were Europeans to realize that Russia is their natural economic partner.

SPIEGEL: Despite the war in eastern Ukraine and the sanctions, Russian-American economic relations when it comes to oil seem to be quite good. Rosneft and the American concern ExxonMobil just opened an oil platform together in the Arctic. President Vladimir Putin even took part in the ceremonies via video link.

Sechin: We have enjoyed working together with Exxon for 20 years — and now with the northernmost oil platform in the world. We believe that there is as much oil there as Saudi Arabia has in its proven reserves. We plan to invest $400 billion in the Arctic by 2030. In addition, our platform Berkut, off the coast of Sakhalin Island, has broken a few records. It is the biggest in the world.

SPIEGEL: “Berkut” means “golden eagle.” But it was also the name of the special police force then-Ukrainian President Viktor Yanukovych used in his unsuccessful attempt to defeat the Kiev protests.

Sechin: Now you’ve let the cat out of the bag. You want to talk about Ukraine. For me, though, Rosneft and our strategy is important.

SPIEGEL: As a listed company with the largest oil reserves in the world, you are operating against the background of the crisis. The sanctions have now cut you off from global financial streams. With $46 billion in net debts, how do you plan to finance the immense investments you have planned?

Sechin: We will be able to easily pay our debts under our own power. Last year, Rosneft achieved a record profit. With a turnover of $80 billion, our profit for the first half of 2014 is $5 billion and it will be $13.5 billion by the end of the year. No Russian company pays as much in taxes as we do. In 2014, our tax bill will be more than $80 billion.

SPIEGEL: Why, then, did you recently request financial assistance from the state?

Sechin: Because we would like to tap into difficult-to-access oil reserves in eastern Siberia and build a refinery there. We would be pleased if the government were to make a bond issue available to us — I would like to underline that it is not a subsidy. If not, I don’t see it as a catastrophe. We’ll just complete the project a bit later. Rosneft does not have any financial difficulties.

SPIEGEL: When will the sanctions begin to really hurt Rosneft and Russia?

Sechin: Everyone is suffering under the sanctions. It is a mistake to expand them to companies and bring them into a political conflict. Sanctions are a kind of war. That is how hatred is sown and it produces vengefulness.

SPIEGEL: The sanctions target Rosneft because you are seen as a close ally of Putin’s. America is seeking to exert pressure on the president.

Sechin: Then the West doesn’t know Russia’s president very well. Putin will not allow himself to be pressured.

SPIEGEL: Have you offered the president any advice regarding Ukraine?

Sechin: The president makes his decisions by himself. It is absurd to believe that I have any influence over him. My relationship with Putin is also not such that I could approach him with such questions. The idea is just as absurd as placing me on the sanctions list.

SPIEGEL: You spoke of the vengefulness that becomes an element in economic warfare. Is there a possibility that Europeans might find themselves sitting in cold houses this winter because Russia has shut off deliveries of natural gas and oil?

Sechin: Everyone ends up sitting where they want to. But don’t worry, only the uninformed could believe such a thing were possible. Rosneft and other Russian companies will adhere strictly to their supply contracts, which are safeguarded by credits and contractual penalties. That is why contracts exist. As an internationally traded company, Rosneft is listed on the London Stock Exchange and adheres to its standards.

SPIEGEL: Are you concerned that Europe might buy less of its oil and natural gas from Russia in the future?

Sechin: Just like every customer, Europe has the right to decide on its own. But Europe has an advantage over competitors in that it can rely on cheap Russian energy reserves. Currently, there is a lot of talk about shale gas and other new exploitation technologies. But they would make gas more expensive for European consumers. I am sure of that. Ignoring advantages is irrational.

SPIEGEL: Has your cooperation with German companies like Siemens been negatively affected by the sanctions?

Sechin: No, the gas turbines and control systems that we buy do not fall under the resolutions. But in the first half of this year, our imports of technology from Germany as a whole have sunk by 15 percent. Nevertheless, there isn’t a deficit of such machinery in Russia. American and Asian companies have been more than happy to fill the void. Certainly, Germany produces quality drilling rigs and pipeline systems. But if Germany doesn’t want to deliver, we’ll just buy in South Korea or China. If Germany’s goal is that of preventing its own companies from earning money, then go ahead.

SPIEGEL: At the end of last year, Rosneft closed a $270 billion deal with China. Is Rosneft turning toward Asia?

 

‘Yukos’ Path to the Top Was Paved with Corpses’

Sechin: I wouldn’t call it a reorientation. We are simply diversifying our markets. Diversification leads to greater stability. Plus, the Chinese pay in advance and some of our storage facilities are near the Asian market in eastern Siberia.

SPIEGEL: Russia is writing off Europe?

Sechin: Please. China’s share of Rosneft’s exports today is merely 13 percent. Europe’s is 39 percent. We have four petrochemical factories in Germany and as such we are your largest Russian investor.

SPIEGEL: Yet raw materials have always been an element of politics.

Sechin: Rosneft closed its first contract with China in 2010, prior to the sanctions. The Indians, too, need oil. In the Asia-Pacific region, the need for liquid natural gas is immense. It is thus impossible to isolate Russia. The world today is different than it was a few decades ago. With its sanctions, the West is first and foremost limiting itself — when it comes to the importing of Russian raw materials and the exporting of machines and facilities.

SPIEGEL: One reason for Rosneft’s rapid climb was that it took over parts of Yukos, the oil and gas company owned by Mikhail Khodorkovsky, after it was dismantled by the state. The European Court of Human Rights censured Russia’s treatment of Yukos and the Permanent Court of Arbitration in The Hague ordered Russia to pay $50 billion to the company’s former owners. Will that have any effect on your global expansion?

Sechin: All large energy companies have bought up others. We weren’t part of the arbitration proceedings. Rosneft merely bought parts of the former Yukos corporation, just as Italian concerns Enel and Eni did, or Gazprom and others. The financial auditors were from PriceWaterhouseCoopers. I am not ignoring the possibility that the two verdicts were politically influenced.

SPIEGEL: On what is your suspicion based?

Sechin: There is a large, international PR campaign being pursued by former Yukos shareholders. There were procedural errors made. Jurists question the arbitration court’s verdict because the court has no jurisdiction according to the Energy Charter Treaty. The Charter is there to protect foreign investors. But where are they? Then-shareholders of Yukos like Mikhail Khodorkovsky and Leonid Newslin are Russians and they exploited Russian oil. They merely registered their corporation via offshore companies. In violation of Russian law, they bought Yukos for $300 million with a loan from the Finance Ministry that was never paid back. Competitors were kept away from the auction. Two companies belonging to the Khodorkovsky bank Menatep, with the telling names Montblanc and Volna, which means wave, then fought hard against each other. I am being ironic.

SPIEGEL: You are thought to have organized the break-up of Yukos. Is that true?

Sechin: That is a myth. Many continue to see Yukus as the innocent victim of evil aggressors. What nonsense! Let me tell you about my first experience with Yukos. In the fall of 1999, I had hardly been named the head of Putin’s administration when I found Vasily Shakhnovsky, a Yukos shareholder, standing uninvited in front of my door. Quickly and directly, he offered me bribe money. At the moment, he said, we don’t need anything from you, but we would like to regularly pay you money so that you represent our interests. I threw the man out of my office. Later, Khodorkovsky noted that Yukos and I were “unable to build a good relationship.”

SPIEGEL: Shakhnovsky might see things differently. When Khodorkovsky was released in December, you said that he could get a job as a Yukos employee. Were you just making fun of him?

Sechin: I said he could approach our personnel department. These people weren’t joking back then. Those who stood in their way were shoved aside. Yukos’ path to the top was paved with corpses. Russian courts confirmed as much.

SPIEGEL: In a written interview with SPIEGEL conducted from prison in 2010, Khodorkovsky said that Yukos never applied physical violence. Is he lying?

Sechin: It was never proven that Khodorkovsky took part in murders, but his employees, including his closest confidant Leonid Newslin, have been implicated. I doubt that Khodorkovsky, as head of the company, knew nothing about all that.

SPIEGEL: What are the specific allegations?

Sechin: The mayor of Nefteyugansk, the Siberian oil town, wanted Yukos to pay fair taxes and was killed. Valentina Korneyeva, the owner of a small tea shop in Moscow, was shot in the head. She refused to sell her shop to Khodorkovsky’s bank Menatep, which needed the property. There were assassination attempts on uncomfortable minority stakeholders. Employees of Yukos executive Newslin hired outlaws to do the dirty work. A hustler, a man named Gorin, tried to blackmail Khodorkovsky. Then Gorin and his wife were brutally murdered in their garage, and the corpses eliminated. Only a bit of brain fluid remained behind on the floor.

SPIEGEL: You insist that you weren’t behind the breaking up of Yukos. And yet you even know the name of the tea shop owner who allegedly stood in the way of Mikhail Khodorkovsky back then. What gives?

Sechin: During my time in the presidential office, I had access to such information. Plus, the whole thing makes me angry. It is time to look at these things objectively! Khodorkovsky and Co. were not angels and aren’t angels now. These are people who shy away from nothing. Our intelligence agencies have information that Khodorkovsky and Newslin remain focused on vengeance, against me as well.

SPIEGEL: How great was the damage done to Russia’s investment climate by the breaking apart Yukos?

Sechin: The contrary is true. Yukos defrauded its shareholders by way of offshore firms. Today, there is greater transparency in Russia, greater tax equity and greater legal protection for companies.

SPIEGEL: In reality, the Yukos case had more to do with bringing a company, which had been privatized after the Soviet Union’s collapse, back under state control. Do you deny that?

Sechin: The Yukos case has nothing to do with ownership questions. It’s about a crime. The ownership question has to do with efficiency. In the 1990s, it was always said that a private ownership class would develop which, by way of effective management and high taxes, would pull up the entire country. That didn’t happen. The entire oil and natural gas sector was privatized for less than $7 billion. Two years ago, we got more than that for the sale of just 12 percent of Rosneft to BP, adjusted for inflation of course.

SPIEGEL: Does that mean you are in favor of state ownership of energy companies?

Sechin: It is approached differently around the world. In America, commodities firms are privately owned but strictly regulated. Regulation is the most important thing, I think. We have decided at Rosneft to reduce the state’s holding, but the state will still maintain a controlling stake, which is beneficial to our minority shareholders. According to Russian law, only those companies in which the state holds a majority stake are allowed to undertake offshore drilling activities.

SPIEGEL: Currently, your business activities are beginning to be negatively affected by the conflict in eastern Ukraine. As a company that operates globally, are you not interested in the quickest end possible to a conflict that Russia is nourishing with its support of the separatists?

Sechin: The most important thing is to stop the spilling of blood. A humanitarian catastrophe is developing in eastern Ukraine. I would prefer not to comment on your political assessments.

SPIEGEL: What will happen with Rosneft investments in Ukraine?

Sechin: By the end of the year, we had planned to open a refinery that we modernized in the eastern Ukrainian town of Lysychansk. There was no fighting there, but Ukrainian artillery has reduced the facility to rubble. We estimate the damages to be around $140 million and we will negotiate with the government in Kiev over compensation.

SPIEGEL: But isn’t Russia primarily responsible for the war?

Sechin: Russia didn’t initiate the Ukraine crisis. That is historical fact and it will become clear over time. As the president of Rosneft, it is my job to increase shareholder value. As the largest Russian investor in Germany, we are focused on further developing our cooperation. Our principles include trust, sustainability and respect for others’ interests. I don’t have time for political issues. After all, I also want to have time for my children.

SPIEGEL: Igor Ivanovich, we thank you for this interview.

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