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By John Helmer, Moscow

With announcements they will trade crude oil in different directions, Russia’s state oil companies have this week put the kybosh on Ziyavudin Magomedov’s (lead image, left) attempt to establish himself as the oligarch in charge of Russia’s westward oil trade to Europe. Magomedov’s demise follows the decline in political influence of Deputy Prime Minister Arkady Dorkovich (right), Magomedov’s ally and Prime Minister Dmitry Medvedev’s protege. Magomedov, sources in the maritime sector say confidentially, is unable to raise financing for his Summa group in the US or Europe, and Dvorkovich and Medvedev have been unable to help him with money from the Russian state banks. Dvorkovich is now thinking of a job outside the government, the sources add.

Magomedov is not the only oligarch-sized figure in Russia’s maritime sector to be overtaken at the borrowing window of the state banks, and to be losing in the competition for cash and favour. Gennady Timchenko, who has dominated the westward direction of Russia’s crude oil trade through Gunvor, and its shipment by rail, pipeline, port, and tanker, was snubbed at the St. Petersburg Forum last week by First Deputy Prime Minister Igor Shuvalov. Shuvalov, a source at the Forum says, “kept Timchenko pacing the floor, waiting more than hour for their appointment. Shuvalov wouldn’t have dared do that in the past.” Shuvalov, the source adds, is demonstrating newfound muscle in the Kremlin as President Vladimir Putin’s favoured administrator of crisis measures.

Igor Sechin (centre), the chief executive of Rosneft, has been opposed to Magomedov’s schemes for several years. He, Nikolai Tokarev, chief executive of the pipeline company Transneft, and Timchenko have been behind the efforts to push Magomedov out of the Primorsk oil port on the Baltic, as well as out of Novorossiysk port, on the Black Sea. That story can be followed here. Rosneft won’t respond to questions directly, but it is letting the market know this week, as Sechin has said more than once before, that there is no role in their oil trading plans for Magomedov. Rosneft’s preference to trade with Vitol – at one point Magomedov’s partner in the Rotterdam project – has also faltered because of the US and European Union sanctions campaign.

At last report in February 2014, Magomedov was trying to salvage the financing for his planned Rotterdam terminal by asking Sechin to introduce Rosneft as the guarantor of the crude oil flow, and of the bank financing which would be secured by this. Magomedov exaggerated Sechin’s readiness to negotiate. A year earlier, Sechin dashed Magomedov’s hopes to expand into state shipbuilding. An attempt to open a line of LNG export business on the back of Gazprom was also rebuffed. Vladimir Yakunin, chief executive of Russian Railways, has stymied Magomedov’s moves to acquire railroad assets.

By July of last year Magomedov’s deputy, Alexander Vinokurov (below, left), chief executive at Magomedov’s Summa holding in Moscow, omitted the Rotterdam project from his discussion of the active projects in their portfolio. In his interview with the St. Petersburg bible on maritime business, PortNews Vinokurov emphasized the eastward and southern directions, across the Sea of Japan and the Caspian Sea, for port loading and tanker shipment of oil, bypassing Europe. Then by October Vinokurov and his American deputy James Simmons were history.

Without announcement from Summa of their departure, a new chief executive for the holding was disclosed. This is Vladimir Kayashev (centre). His most recent job has been at the Novorossiysk Commercial Seaport, which Magomedov took over in 2010. Kayashev took Magomedov’s side in the subsequent (losing) fight with Rosneft and Transneft over management control; for more details, read this.


According to Nadezhda Malysheva of PortNews, “the change of leadership of Summa Group is obviously associated with the new stage of its development. Vinokourov is a professional investor and specialist in M & A. His competence was needed when Summa was active in acquiring assets like Fesco. Now Summa puts one of its main objectives as improving the efficiency of its existing assets. A different plan was required, so there was a change of the president of the group.”

Kayashev’s appointment also signaled the withdrawal of the interest which the US investment fund TPG, controlled by David Bonderman, had been showing in Magomedov’s businesses. Still, with 36% of the Moscow-based, London-listed Lenta supermarket group, Bonderman controls two seats on the Lenta board, including the chairmanship. He appeared in St. Petersburg last week to protect that position, Lenta’s share price, and TPG’s paper worth $1.4 billion. Bonderman continues to tout his Russian investment by telling his US critics that Russians “have got to eat. They’re going to continue to do that.” Oil and shipping are more sensitive.

Last week Putin held a meeting at which Magomedov’s Rotterdam project was one of several discussed in the Kremlin’s planning for crude oil exports in the context of a protracted sanctions campaign. There is no record of the meeting on the Kremlin website. Press leaks have followed, reporting that Magomedov and Dvorkovich were both present, along with representatives of Rosneft, Gazpromneft, Surgutneftegas, and Transneft. The government officials reportedly at the meeting with Putin included Minister of Energy Alexander Novak (above, right), Minister of Transport Maxim Sokolov, and Putin’s economic adviser, Andrei Belousov.

Dvorkovich’s office said this morning that Dvorkovich did not attend the meeting, and cannot comment on what was decided there. Magomedov’s spokesman, Evgeny Timoshinov, is not responding to emailed questions.

Novak has said publicly his ministry will not give Magomedov the guaranteed crude oil trade it needs to secure financing to build the terminal in Rotterdam. Novak’s ministry isn’t willing to amplify what he said.

Kommersant also reported that government and state corporate support will no longer be considered for any Russian project in the Netherlands, or in other European states imposing sanctions on Russia. That includes countries in which there is a risk of court injunctions or asset arrests as part of the Yukos litigation campaign.

dyukovRosneft and Gazpromneft refuse to respond to direct questioning this week on Magomedov’s standing as an oil trader for their account. Both companies have been targeted by the sectoral sanctions; they have mounted legal challenges against them in the European Court of Justice. Before that Gazpromneft was targeted by a global protest campaign orchestrated by Greenpeace. Personal sanctions have been applied to Sechin, but not to Gazpromneft’s chief executive, Alexander Dyukov (right).

Dyukov told reporters at the St. Petersburg Forum he sees “no economic sense to participate” in Magomedov’s Rotterdam project. He dismissed Magomedov as a small-scale arbitrageur in the oil trade, adding that if Gazpromneft decides to participate in oil swaps across the Caspian with Iran, it will do so by direct engagement with the Iranians, not through a Magomedov intermediary.

What is happening is not exactly news, sources in the Russian maritime sector acknowledge, but the political significance is fresh. According to one source at the Forum, Shuvalov has now eclipsed Dvorkovich, and Sechin too. “Luckily for Shuvalov, he managed to avoid intervening in the fields of Sechin’s interest. Thanks to such wise behaviour he has managed to keep his position around Putin, and even reinforced it despite scandal. He is now positioned as the clever bureaucrat of the old Moscow school, who knows how to manage social crisis and finance. By contrast, Sechin has been declining because of his talent at ruining state finance and the situation at Rosneft. In the circle around Putin he’s now standing on only one foot.”

A source close to the Kremlin comments: “The Americans, as usual, haven’t realized what their scheming leads to. So far the sanctions have had one clear outcome. The pro-westerners and liberals – Medvedev, Dvorkovich, [former deputy prime minister Alexei] Kudrin – are neutralized; they are all finished.”

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