Tag Archives: Lukoil

PR, energy and corruption

Moscow car crash involving Lukoil exec, from mvkursk.ru via theotherussia.orgOne of the biggest stories in the Russian blogosphere is a car crash that killed a prominent doctor and her daughter during a Moscow morning rush hour late last month.  In the other car, and escaping with minor injuries, was a Lukoil vice president, Anatoly Barkov, and his driver.  Barkov is head of corporate security at Lukoil, and as has been pointed out, he has a conspicuous gap in his resume between being born in 1948 and graduating from the Ufa Oil Institute in 1992, the year he became head of the foreign projects department of Lukoil’s predecessor, LangepasUrayKogalymNeft (see the initials in there?).

The Moscow traffic police quickly blamed the crash on the car driven by the women, but an outcry spearheaded by their family and local automotive organizations brought attention to the case and accusations of a cover-up.  Video footage has emerged that shows Barkov’s black Mercedes pulling into the VIP center lane that separates the two sides of the road just moments before colliding with the other car, which was heading in the opposite direction.  The actual collision, however, is hidden by a billboard.

The incident and Lukoil’s initial rather callous response has hurt the company’s image and the ensuing public outcry has led to the reopening of the case.  Witnesses are being implored to step forward, though some apparently are fearful of repercussions.

Corporate security is a huge deal for these firms, and the divisions tend to be stacked with former (or current) security service employees.  The implication is that during Barkov’s formative years, and up until he began working at Kogalymneftegaz (apparently while attending Ufa Oil Institute), he was involved in the KGB, GRU and/or its successors.

This type of biography is not rare for higher ups, particularly in the oil industry.  There is similar speculation surrounding Igor Sechin, Rosneft’s chairman and the deputy Vice Premier who oversees Russia’s oil and gas sector.  He graduated with a degree in Portuguese and spent significant amounts of time in Africa, ostensibly as a translator, before emerging in the early 1990s in the same St. Petersburg mayoral administration that launched Putin’s career in politics.

These types of (alleged) connections to the security services give accusations of a cover-up involving the police more credence, but there is a general frustration among the latitude afforded to the “well-connected.”  A similar car crash in Irkutsk, where a daughter of a local United Russia figure killed one pedestrian and paralyzed another, has also generated outrage.  The momentum picked up when video footage of the horrific incident emerged online, clearly showing the driver emerging from the car and examining the damage to her hood, while ignoring the crushed bodies on the ground.  That case, which originaly absolved the driver of guilt, has also been reopened.

Elsewhere in the FSU, and thankfully less graphic, Azerbaijan’s ruling family could come under pressure after the Washington Post reported on some sketchy Dubai property deals were apparently done under the names of the children of the Azeri president:

Even by the standards of a city that celebrates extravagance, it was a spectacular shopping spree: In just two weeks early last year, an 11-year-old boy from Azerbaijan became the owner of nine waterfront mansions. The total price tag: about $44 million — or roughly 10,000 years’ worth of salary for the average citizen of Azerbaijan…In all, Azerbaijanis with the same names as the president’s three children own real estate in Dubai worth about $75 million, property data indicate. Dubai real estate dealers with knowledge of some of the transactions said the purchases were made by a buyer representing Azerbaijan’s ruling family.

Ilham Aliyev, Azerbaijan’s president, has ulimate control over his countyr’s oil and gas sector, and has apparently done quite well for himself (above and beyond his reported $228,000 salary). The Caspian oil rush following the collapse of the Soviet Union was marked by kickbacks, corruption and power struggles, as described nicely by Steve LeVine.  Many of those problems clearly continue today, though it’s unclear if stories such as this Dubai real estate excess will cause any changes to the system.

All it takes is a look across to other Caspian / Central Asian states to see similar dealings. The daughter of Uzbekistan’s leader is heavily involved in the country’s energy sphere. Turkmenbashi was famously skimming off gas export revenues for his ridiculous prestige projects. Iran’s Revolutionary Guard apparently benefits from control over gasoline distribution channels within the country, and can facilitate lucrative fuel smuggling operations.

The NYTimes had a front page article on Sunday detailing possible violations in US sanctions by companies investing in Iran, and particularly drawing attention to those receiving US money in grants, projects or loan guarantees.  Unsurprisingly, the oil and gas sector topped the list of industries affected, as numerous international companies seek to benefit from Iran’s attempts to modernize its refineries, develop its gas fields and expand oil production.

The efficacy of such (attempted) sanctions is debatable, but the potential scandal (and resulting pressure from the US) has caused some companies to pull back from their Iranian operations.  For example, the Indian refiner Reliance has added a clause to its oil product sales contracts where the purchaser is barred from re-selling the cargo to Iran. However, industry press is reporting that Petronas nevertheless sold gasoline from Reliance to Iran, in apparent violation of the refiner’s terms.  It’s easy enough to route a shipment through a layer of traders to clear your conscience when presented by the types of premiums Iran is forced pay out for its imports.

Lukoil has also allegedly supplied gasoline to Iran, exporting the product through the Caspian.  Such trade dealings do not have the same negative connotation within Russia as they do in the US, though, and would be unlikely to generate near the negative feedback as the car crash incident.  However, Lukoil maintains a 1,500 site retail network in the US east coast and counts ConocoPhillips as a strategic investor.  Should US efforts to tighten restrictions and sanctions on Iran intensify, these US ties may provide some leverage for gaining Lukoil’s cooperation. Anyway, the company would likely welcome any form of positive international PR in the face of continued backlash over the fallout from last month’s car crash.

Update: Time.com has an article on a pioneering shareholder activist, Alexei Navalny, who’s worked to expose shady dealings particularly among Russia’s energy firms.  Bill Browder did somewhat similar work with his Heritage Capital (though was more flashy at it and seemed to be driven more by profit) before being kicked out of the country and faced with legal claims.  Meanwhile, Forbes Russia has a video of two possible reconstructions of the Barkov’s car crash as the police piece together witness statements.  Regardless, seems pretty unsafe to have an undivided middle lane, despite its reservation for VIP/emergency use…