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. Last Updated: 07/27/2016

Rosneft Hires 3rd Finance Chief

ReutersPeter O'Brien in June 2006
Rosneft has named a former state weapons official to run its day-to-day finances, the company said Wednesday, but some saw the move as squeezing out its only Western manager in favor of a state insider.

Sergei Makarov, the new vice president in charge of finance, has held two top posts at state-run firms before.

Starting 2003, he headed Oboronprom, a subsidiary of state arms trader Rosoboronexport, and moved on in 2005 to work as managing director of Vneshtorgbank, the country's second-biggest bank.

Peter O'Brien, Rosneft's U.S.-born vice president of finance, said the hire was "very well-timed."

"We're heading into a year when we're expecting more than $5 billion in capital expenditures, which means the finance functions require more management capabilities," he said.

The state oil company, the country's biggest by market capitalization and the second-biggest by output, will now have three vice presidents running its finances.

O'Brien joined Rosneft last March, three months before the company held Russia's biggest initial public offering, selling 15 percent of its shares for $10.6 billion. Bringing a Westerner into the company's top management gave a boost to investor confidence ahead of the landmark IPO, analysts said.

"But now the IPO went through, and to have a foreign manager at such a high level is not very comfortable for a government company," said Valery Nesterov, oil and gas analyst at Troika Dialog. "I would like to expect that the changes will not effect the company's transparency."

The other vice president dealing in finance is Anatoly Baradovsky, who is 64 and approaching retirement age. Baradovsky declined to comment on the swap.

"Everyone will have their designated roles," said the firm's chief spokesman, Nikolai Manvelov. "No one will get in anyone's way."

Another spokesman, Hugo Erikssen, said: "Makarov will handle day-to-day matters ... while Peter's portfolio is expanded to include other things."

A statement on Rosneft's web site said Makarov would be in charge of "increasing the effectiveness of the company's internal financial operations, as well as budgetary questions."

O'Brien will now focus on strategy, restructuring, mergers and acquisitions, the statement said.

The government has been sending mixed messages about the future ownership of Rosneft, which produced 80.6 million tons of oil equivalent last year and expects to produce 90 million tons in 2007.

Igor Shuvalov, Kremlin aide and Russia's envoy to the Group of Eight, said last year that all of Rosneft's shares would be sold off through public offerings in the next three to 10 years.

Rosneft chairman, Igor Sechin, who also serves as deputy chief of staff to President Vladimir Putin, has lobbied for stronger state control over the oil sector, however.

About two-thirds of Rosneft's output comes from the former Yukos production unit, Yuganskneftegaz, which was bought at a bargain price in December 2004 amid a Kremlin-backed legal onslaught on Yukos and its founder, Mikhail Khodorkovsky.

It is unclear what Makarov's stance will be on whether the state should ease or tighten its grip on the oil sector. His background of working for state-run companies did not sit well with some analysts.

"He looks like an insider," said Kim Iskyan, head of research at MDM Bank.

Makarov declined through spokesmen to comment. Spokespeople at Vneshtorgbank and the subsidiary of Rosoboronexport that Makarov headed both declined to comment on their former colleague.

Makarov was born in Moscow in 1963 and educated at the Moscow Institute of Aviation and the London School of Business Administration. During the late 1990s and early 2000s, he worked at a number of British firms. He has 12 years of experience in corporate finance.