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. Last Updated: 07/27/2016

Rosneft: Koshman Illegally Sold Oil

The president's envoy to Chechnya, Nikolai Koshman, has been illegally selling oil from the separatist region, state oil firm Rosneft alleged Tuesday.

Rosneft was authorized earlier this year to bring Chechen oil flows under its control, but Koshman has put himself in charge of oil sales from the separatist province, Rosneft spokesman Alexander Stepanenko said Tuesday in a telephone interview.

Koshman has blocked Rosneft's efforts to obtain an oil sales license, even as he runs a network of unlicensed traders selling oil on the black market, Stepanenko said.

Koshman was not available for comment Tuesday.

Segodnya reported Tuesday that Koshman was selling Chechen oil to companies registered in Ingushetia for a mere 2,500 rubles ($88) a ton, though the average market price in the region was 5,000 rubles a ton.

"Koshman's version is that the cash [raised from these sales] was being spent on the restoration of the Chechen economy, but that does not explain why oil was sold without a license and at greatly reduced prices," Segodnya said.

Oil extraction in Chechnya was down to a mere 190,000 metric tons last year, according to Fleming UCB investment bank. However, if Rosneft can carry out its plans to raise that to 2 million tons a year in the near future, the Chechen oil industry could generate $400 million or more in annual revenues.

But even as Rosneft has gone ahead with its reconstruction plans, Koshman was moving to revive the Chechen state oil company. He signed a decree at the end of May reestablishing the Yunko oil company that ran the Chechen oil industry before the first war with Chechnya and renaming the enterprise Grozneft.

"This is just bespredel [lawlessness]," Stepanenko said. "We were supposed to restore the whole chain f from the extraction of oil to its sales, but now we are pushed out without any compensation."

So far this year Rosneft has invested $139 million f including $39 million of its own funds and $100 million in bank credits f to rebuild the Chechen oil industry, said Rosneft president Sergei Bogdanchikov, in remarks reported by Interfax.

By the end of last month, Rosneft had doused the flames and restored 18 of 39 burning oil wells across Chechnya. It had also fixed the region's two largest oil storage facilities and begun work on fixing Transneft's pipeline across Chechnya, Stepanenko said.

The Energy Ministry has also weighed in against Koshman.

Yunko f created in 1995 by the Fuel and Energy Ministry f in fact never had legal status in Russia, said Alexander Kochnev, first deputy energy minister, speaking Monday at a news conference. Koshman's decree recreating the enterprise "is not particularly legal," he said.

Koshman is already at the center of a power struggle for control of Chechnya. President Vladimir Putin seemingly shunted him aside last week when he appointed Moslem cleric Mufti Akhmed Kadyrov to head the Chechen administration.

Kadyrov's inauguration as head of Chechnya was delayed until Tuesday after local leaders of 12 of Chechnya's 18 districts joined forces Monday to ask Putin to remove Kadyrov "in the name of peace and accord" as well as to "avoid new bloodshed" in Chechnya.

Kadyrov dismissed the appeal as an act of sabotage engineered by Koshman in order to install an administration as corrupt as the pro-Moscow administration that ran parts of Chechnya in 1996.

Vladimir Nosov, oil analyst at Fleming UCB, said that it would be better for the region if Rosneft were to succeed in gaining control of Chechnya's oil industry.

"Rosneft is an inter-regional company. It can attract investments and its representatives could stay above all the Chechen clans interests," he said.

"A local structure [such as Grozneft] will mean Chechens will start to fight for control of the company f and if they are excluded they will not obey it. They will again make holes in the pipelines, steal oil, build makeshift refineries and everything will be back to what it used to be before the latest war."