Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Oilmen Give Prime Minister Mixed Grades

Viktor Chernomyrdin, a familiar face in international energy circles, gets top marks from his Western associates as a manager but faint praise, or none at all, as a reformer.


And one Western executive who has dealt extensively with Russia's new prime minister told The Moscow Times on Tuesday that Chernomyrdin has been a firm opponent of Yegor Gaidar's policies of economic shock therapy. Like many Western representatives approached for comment, the industry official declined to be identified.


"He does not make decisions quickly", the executive said of Chernomyrdin. "We have seen a lot of talk about change in the gas and oil industry but so far they are just bits of paper".


Soviet minister for the gas industry from 1985-89, then president of the state firm Gazprom, Russia's biggest single export earner, Chernomyrdin has mixed with Western gas industry officers for over a decade.


He is partly credited with the industry's successful record. Natural gas, which accounts for over $4 billion of Russia's exports, almost a quarter of the total, is the only major sector of Russian industry where production and exports have not fallen over the last three years.


Svein Breivik, vice president of Norsk Hydro, the Norwegian gas company, described Chernomyrdin as a "very professional manager".


One of Chernomyrdin's most controversial moves since taking over as deputy prime minister in charge of fuel and energy in May was to stop the privatization of the oil industry.


He has since proposed a restructuring of Russia's fragmented regional producers, refiners and pipelines into three large joint-stock companies that will form the basis of privatized firms but with a delay of up to three years.


He also recently backed a plan for restructuring the gas industry that preserved a state monopoly and allowed for state ownership for another three years.


George Reese, energy specialist at Ernst & Young, said the oil industry policy backed by Chernomyrdin was "insightful and progressive. It was certainly better than proposals for a privatized monopoly that were floating around at one stage".


Chernomyrdin was also instrumental in the recent decision to award a contract for the huge Shtokmann gas field to a Russian consortium, excluding a rival Western group.


Reese said the decision showed that Chernomyrdin's sympathies were clearly with the traditional Russian industrialists.


"He's pro-Russian", Reese said. "He will insist in maximum Russian participation in foreign investment projects and that's not necessarily a bad thing".


Chernomyrdin's appointment is "not good news for investors and new entrepreneurs", said a Western advisor to the Russian government who declined to be named. "This is a clear victory for the managers of the economy of the former Soviet Union".


Under Chernomyrdin, the advisor said, so-called nomenklatura privatization of industry -- when public access to privatization is blocked by government officials who break off from the state to operate privately -- will continue.


"We will see more privatizing of branch industries along the lines approved in the energy sector", that Gaidar's government "was trying to avoid", he said. "Immediate macroeconomic dangers will be renewed in large sectors of the economy, followed by wage and price controls".


"There may be a short period of retrenchment until Chernomyrdin comes to grips with reform", said Richard Hewitt, a Coopers & Lybrand consultant. Still, Hewitt said he thought investment would continue to increase gradually as it has since last January.


According to one Western diplomat, "The coal sector dealing with energy has a lousy opinion of Chernomyrdin. He was considered a real setback to reform when he was appointed energy minister last spring".


The differences of personality between Gaidar and Chernomyrdin, he added, can be summed up as a "young whippersnapper replaced by a grey, old Communist apparatchik".


Another Western diplomat added: "Chernomyrdin is definitely bad news. Being energy minister is hardly qualification to be prime minister".


Still, said this diplomat, Chernomyrdin's appointment may actually stimulate Western investment in the short term.


That is because a slowdown of reforms might ease economicinstability stemming from unemployment and bankruptcy.


Other business leaders, though, are still waiting to make up their minds.


"I'm meeting with people now to find out the psychological effect that Chernomyrdin will have on young entrepreneurs", said Bruce Chelemer of Seagram.


"However", he added, "if we had any big business decisions, we'd hold them now".