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. Last Updated: 07/27/2016

Putin Taps Unknown for Energy Job

President Vladimir Putin completed his new Cabinet on Saturday, appointing as energy minister a relative unknown, Alexander Gavrin, who has close ties to the country's biggest oil producer, LUKoil.

While most observers lauded the sacking of Viktor Kalyuzhny as head of what was formerly called the Fuel and Energy Ministry, political observers warned that Gavrin's appointment may not help curb the power of the country's financial and industrial clans, the so-called oligarchs.

"It's a first sign," said Andrei Ryabov, a political analyst at the Moscow Carnegie Center. "It's important for the president to show his independence to the West, and do it demonstratively. But Kalyuzhny's firing is so far symbolic."

Oil analysts were more upbeat. "Kalyuzhny was seen as a lobbyer for the narrow interests of certain oil companies," said Steven Dashevsky, an oil and gas analyst at Aton brokerage. "His firing is the first test of Putin's ability to get rid of such people." But Gavrin has no track record in the government, he added.

"Kalyuzhny was seen as a representative of a circle of oligarchs and his firing shows Putin is more independent from those oligarchs," said United Financial Group oil and gas analyst Dmitry Avdeyev.

It is unclear exactly how the ministry's role will change under Gavrin - previously mayor of Kogalym, in the Siberian Tyumen region's oil-rich autonomous district of Khanty-Mansiisk - but it is expected his stewardship will bring the country's massive oil and gas sector under stricter Kremlin control.

From 1989 until his move to the Kogalym administration in 1993, Gavrin was trade union chief at LUKoil subsidiary Kogalymneftegaz. He was elected mayor in 1996. LUKoil head Vagit Alekperov backed his re-election campaign last March, Reuters reported.

The former minister, accused of corruption by local media, is seen to have close ties with controversial financier and State Duma Deputy Boris Berezovsky. Kalyuzhny's critics also said he exerted too much control over the oil and gas sector, setting intricate and frequently changing export restrictions that essentially favored his allies.

While minister, Kalyuzhny pushed for a plan to set up a state cartel that would combine oil, gas, metals and transportation bodies - based on the government's stakes in Rosneft, Slavneft and Onako oil companies - that would be able to fix fuel and transportation prices. That scheme now looks dead.

Kalyuzhny was also involved in conflicts with other ministries, regional administrations and companies, including powerful gas monopoly Gazprom.

The Carnegie Center's Ryabov said Putin tried to maximize the impact of his move Saturday by firing Kalyuzhny after the latter accompanied him on a recent trip to Central Asia. "The trip was seen as a sign of confirmation [of Kalyuzhny's reappointment]," he said. "So his sacking was unexpected."

Novaya Gazeta opined Monday that Gavrin represents the interests of Berezovsky rival Anatoly Chubais, the influential head of energy grid operator United Energy Systems.

But Ryabov said it is too early to say whether Kalyuzhny's dismissal will weaken Berezovsky's clan within the Kremlin, known as "the family."

Vladimir Pribylovsky of the Panorama think tank, said Gavrin's appointment rather speaks to the power of a Berezovsky ally, presidential Chief of Staff Alexander Voloshin, whom Putin is widely expected to reappoint soon.

"Berezovsky is not the top man in that Kremlin circle. No one in the presidential administration has ever had the power Voloshin now has, not even under [former President Boris] Yeltsin.

"And while Kalyuzhny does represent a loss for Voloshin's group, Gavrin's appointment is certainly no gain for Chubais."

Pribylovsky added that it was unclear whether the Energy Ministry's influence in the government will change.

Ryabov said Gavrin's appointment does n ot necessarily mean LUKoil's influence on the government will increase. But Pribylovsky said the appointment means the Berezovsky/Voloshin group did not lose as much from Kalyuzhny's sacking as they might have. "Gavrin is still their man," he said.

The oil industry is one of the country's largest and constitutes the chief export, bringing in a large chunk of the national hard-currency revenues and a significant contribution in taxes. Oil companies are set to export record volumes of 3 million tons per month this summer to capitalize on soaring prices on the European market, Reuters reported.

Oil companies, including LUKoil and Yukos, praised Gavrin's appointment Monday, Interfax reported.

The government plans to sell large stakes in four oil companies for about $1 billion this year. But Aton's Dashevsky said the Energy Ministry has little influence on the outcome of the privatization process.

Ryabov said an important reflection of real policy changes would be the actions of the Gavrin's deputy ministers. "In large part, the deputies run the ministries," he said. "They have huge roles in deciding what to do with financial resources, and many of them have been in their positions for a long time."

Meanwhile, analysts differed over how much the new energy minister represents the interests of his former employer, LUKoil.

LUKoil, generally seen as one of the country's most transparent companies, was previously involved in Cabinet intrigues that took place behind Putin's back when he was prime minister.

Last September, the company was part of a plot overseen by then-Deputy Prime Minister Nikolai Aksyonenko, a Berezovsky ally, which saw the sacking of Dmitry Savelyev, chief of oil-pipeline concern Transneft, against Putin's wishes. Semyon Vainshtok, a former LUKoil executive, replaced Savelyev in a move seen as benefiting his one-time employer.

"Gavrin's a LUKoil man in a big way," UFG's Avdeyev said. "He wouldn't have been mayor [of Kogalym] otherwise."

But Aton's Dashevsky played down the connection. "Of course Gavrin knew the directors [of LUKoil] as mayor," he said. "But it's too early to tell about the company's lobbying. ... LUKoil, as Russia's biggest oil company, can always count on individual decisions on the part of the government with or without Gavrin as minister."

At the same time, observers generally agree that the Energy Ministry lost some of its influence with Kalyuzhny's dismissal. "Not one private company is interested in the ministry having strong powers," UFG's Avdeyev said. "Gavrin's appointment shows the oil companies did not support Kalyuzhny and the ministry's regulatory role."

In another move Saturday, Putin reappointed Alexei Gordeyev agriculture minister and named him deputy prime minister, replacing Vladimir Shcherbak. Separately, Putin appointed Sergei Lebedev director of the Foreign Intelligence Service. (See story, Page 4.)

New faces in the Cabinet include Chubais allies Finance Minister Alexei Kudrin and German Gref, head of the new economic development and trade ministry.

Debate over Gavrin's allegiances continues, but UFG's Avdeyev said that may be beside the point. "Kalyuzhny did a lot of damage to oil companies in the last year," he said. "An agreement between Voloshin and oil companies - or lack of it - is not that significant. What's important is that a symbol of crony capitalism is gone."