Another energy czar

Patrick Crow
Washington, D.C.
[email protected]

Kremlin watchers got an eyeful recently when President Boris Yeltsin replaced Fuel and Energy Minister Boris Nemtsov with the latter's deputy, Sergei Kiriyenko.

The shift came after Yeltsin decreed that deputy prime ministers such as Nemtsov should not also head individual ministries.

That enabled Yeltsin to remove Anatoly Chubais as finance minister following a scandal over a large advance Chubais received for a book on privatization. Mikhail Zadornov replaced him at finance.

Nemtsov and Chubais both will remain first deputy prime ministers in charge of economic reforms, although Chubais is still under a cloud.

Nemtsov said the oil industry has reversed its production decline during his tenure (OGJ, July 14, 1997, p. 28).

"For the first time since the 1980s, oil production in Russia has started to rise. The refining sector has also started to work more effectively, but only slightly. This is only the beginning."

Nemtsov said Russia should maintain its influence in the oil-rich Caspian region and thus, "We need to win the right to transport main Caspian oil against international competition."

And he said it must develop eastern gas fields in the Irkutsk region and in Sakhalin. "They are extremely important for us, because they allow us to take part in the fast-developing markets in China and South Korea."

Kiriyenko's credentials

When Nemtsov appointed him deputy minister last May, he predicted Kiriyenko would succeed him-but neither man expected it so soon.

Nemtsov is outgoing and opinionated, while Kiriyenko is bookish and modest. But they agree on the need to privatize the energy industry.

Kiriyenko, 34, was a banker before becoming head of the Norsi oil refinery in 1996, Russia's third largest refinery. At the time, Nemtsov was the reformist governor of the Nizhny Novgorod region, where Norsi is located.

Kiriyenko ran the energy ministry on a day-to-day basis and directed efforts to complete privatization of energy firms and collect mountains of back taxes from them.

He recently announced that six of Russia's biggest oil groups had paid more than $1.1 billion in back taxes. But the energy sector still owed the state about $7 billion as of Oct. 1.

Privatization

At the succession, Kiriyenko and Nemtsov hammered at the need to sell the remaining government ownership of oil companies.

Kiriyenko said, "Four years ago Rosneft and Lukoil were compatible companies. Now, after 4 years, the privatized company (Lukoil) is far more competitive than the non-privatized one."

But the Rosneft sale has been stalled until sometime next year (OGJ, Dec. 1, 1997, p. 36). Nemtsov accused Rosneft's managers of delaying the sale, which has drawn the interest of several international oil companies.

Also, the sale of 49% of Tyumen Oil Co. recently was suspended after a potential investor complained to the courts about inconsistencies in the bidding process. Kiriyenko vowed to hold the auction as soon as possible.

The new energy minister also showed he has a gift for understatement. He declared, "My task here is obviously going to be a difficult one."