14:58 GMT +316 February 2019
Listen Live
    Opinion

    Due West: Russia Embraces Privatization at St. Petersburg Economic Forum

    Opinion
    Get short URL
    0 01

    The annual St. Petersburg International Economic Forum is an exercise in endurance for its participants. During the day they work, i.e. meet other people, listen to speeches, conduct talks, sign agreements, etc.

    The annual St. Petersburg International Economic Forum is an exercise in endurance for its participants. During the day they work, i.e. meet other people, listen to speeches, conduct talks, sign agreements, etc. If you are a journalist, you chase around those people who meet other people and who listen to speeches (to which you listen yourself), as well as those who deliver the speeches and those who conduct talks and sign contracts. Then, come evening, journalists and their prey migrate from one party to another until the early hours of the morning.

    A typical conversation on a typical white night in Russia’s northern capital goes like this: “Have you been to Mikhail Prokhorov’s bash yet?” – “No, but I’m heading there after the St. Petersburg Governor’s reception” - “Okay, let’s meet later at Forbes’ cocktail.”

    This year the partying was as hard as ever, while over a glass of champagne (or something stronger closer to midnight) CEOs of major multinationals, Russian oligarchs and top-tier Russian bureaucrats were discussing the direction that Russia and its economy were taking after Vladimir Putin resumed his tenancy of the Kremlin in May.

    This time the atmosphere in St. Petersburg was distinctly more normal and somewhat more businesslike than a few years ago, in 2007 or 2008, at the height of what I’d call “the great power fever” that gripped the Russian leadership. At that time, when oil stood at 150 dollars a barrel, the Kremlin had a curt message for potential investors: “It’s either our way or no way.”

    When it came to strategic sectors, and especially the country’s oil and gas industry, getting anywhere near Russian assets was problematic at best and close to impossible at worst. Foreign companies were reduced to no more than risk-service contractors for behemoths like Gazprom or Rosneft.

    The times seem to be changing. “Privatization” and “asset swap” buzzed round the forum’s halls and its party circuit. Selling off significant chunks of Russian state-owned companies or exchanging their shares for shares in Western companies is a strategic trend blessed by President Putin in person in his speech to forum participants.

    The deal that the Russian officials are holding up as a model is ExxonMobil’s agreement with Rosneft, which gives the American supermajor access to Russia’s shelf in the Arctic and the Black Sea in exchange for shares in Exxon projects in Texas and the Gulf of Mexico.

    Rosneft, under its new CEO, Putin confidant Igor Sechin, signed similar agreements with Italy’s ENI and Norway’s Statoil. Sechin was also given an important role as executive secretary of the newly formed presidential commission for the development of the Russian energy sector. This body will supervise and ultimately vet deals with international oil and gas companies.

    All this is significant. Russia’s ruling class of bureaucrats-turned-billionaires seems to be intent on privatizing the state companies it controls and integrating them into the global economic landscape, through a chain of mergers, acquisitions and asset swaps. This is a strategic decision which in fact sets the stage for the final push by the Putin-era elite to legitimize the results of more than a decade of what is euphemistically known in Russia as “redistribution” of assets from the oligarchs of the 1990s to the “state businessmen” of the 2000s. The fate of Yukos and its former owner Mikhail Khodorkovsky is a prime (but by no means only) example of such redistribution.

    A friend in Moscow who works for a major Western multinational concurred with me when I shared this view of the Kremlin suddenly falling in love with the Western multinationals. “From my vantage point this is absolutely true. Russia’s rulers seem to count on finishing a vast privatization program by the end of his first term, and then incorporating what would then become ‘their’ businesses into the global corporate world, thus becoming members of the international business elite. Then, around 2020 or so, they may start contemplating political liberalization and creating stable and transparent rules for business in Russia proper. In ten years most of them will be seventy. They want a graceful and safe exit.”

    If so, it seems that the Kremlin saw the writing on the wall even before the Moscow protesters with white ribbons hit the capital’s streets last December. If my St. Petersburg Forum impressions are anything to go by, the next few years will see a race against time between a Russia that is changing fast and its ruling class, which wants it to stand still just a little bit longer.

    The views expressed in this article are the author’s and may not necessarily represent those of RIA Novosti.

    What is Russia's place in this world? Unashamed and unreconstructed Atlanticis, Konstantin von Eggert believes his country to be part and parcel of the "global West." And while this is a minority view in Russia, the author is prepared to fight from his corner.

    Konstantin Eggert is a commentator and host for radio Kommersant FM, Russia's first 24-hour news station. In the 1990s he was Diplomatic Correspondent for “Izvestia” and later the BBC Russian Service Moscow Bureau Editor. Konstantin has also spent some time working as ExxonMobil Vice-President in Russia. He was made Honorary Member of the Order of the British Empire by Queen Elizabeth II.

    Due West: Dead End Ties for U.S. & Russia

    Due West: Are the Rallies in Russia Making a Difference?

    Due West: Protest Bill Resurrects Debate in Duma, Bodes Ill for Kremlin

    Due West: Is Russia changing its stance on Syria?

    Due West: Kremlin Reshuffle or ‘Refluffle?’

    Due West: Putin Signals Foreign Policy Shift

    Due West: What’s in a Third Term?

    Due West: Conviction Politics in Russia

    Due West: Struggle Between Opposition, Kremlin Moves to Regions

    Due West: A Few Surprises in Putin’s Final Duma Report