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. Last Updated: 07/27/2016

A Mystery Executive with a Familiar Past

The former mining engineer tipped to lead state-run pipeline monopoly Transneft has a mysterious background that suggests a stint in the KGB, another sign that President Vladimir Putin's closest associates are working to further consolidate their grip on power.

Nikolai Tokarev is widely expected to move to Transneft from his post as general director of Zarubezhneft, the state-owned firm that represents the Kremlin's oil interests abroad.

Until now, his public image has mainly been limited to statements about Zarubezhneft's interests in Iraq, which came under threat after the start of the war there in 2003.

Tokarev's candidacy to replace Semyon Vainshtok as Transneft chief executive was presented to the government earlier this week, according to high-ranking government sources cited in the press. Vainshtok stepped down last month, after eight years as head of the company.

Prime Minister Viktor Zubkov must approve the move, but the White House declined to comment on when such a decision could be expected.

"[Tokarev] has proven he is government-loyal and is being moved from one state company to the other," said George Lilis, an analyst at MDM Bank.

Tokarev's official biography yields little information. An ethnic Russian born in the heart of Soviet Kazakhstan, he graduated from the Karaganda Polytechnic Institute in 1973 and built a mining career in the region. But no indication is given of what he did between then and 1996, when he took up a position in Boris Yeltsin's presidential staff, alongside Vladimir Putin.

Yet Tokarev, 57, met Putin far before then, serving with the future president as a KGB officer in East Germany in the mid-1980s, according to research compiled by Vladimir Pribylovsky, the head of the Panorama think tank.

Tokarev appeared out of nowhere in the fall of 1999 to be appointed Transneft vice president in charge of foreign projects and liaisons. One year later, he was tapped to head Zarubezhneft and has remained with the company ever since.

"He is intelligent, organized," said Transneft vice president Sergei Grigoryev, who was with the company during Tokarev's time there.

Grigoryev declined to comment on when Transneft expected a decision on its new president. The company's former vice president, Yury Lisin, has been acting head of Transneft since Vainshtok stepped down.

Tokarev has long been floated as a replacement, along with Industry and Energy Minister Viktor Khristenko and Gazprom deputy chief executive Valery Golubev.

Valery Nesterov, an oil analyst at Troika Dialog, said Tokarev's appointment could affect the way the pipeline monopoly deals with the country's oil majors.

"It's a different Russia than when Vainshtok came to power," Nesterov said.

The state's share of oil production has grown from 14 to over 40 percent under Putin's watch, aided by the dismantling of Yukos and the squeezing out of foreign firms.

Investors will keenly watch whether "the new management will be biased toward companies headed by the state and state-appointed managers" Nesterov said. "Will he help the interests and strategy of the state before turning to private oil companies?"

Tokarev's closest ally in Putin's circle appears to be Gennady Timchenko, the secretive head of Swiss-based oil trader Gunvor, Pribylovsky said.

Tokarev led Zarubezhneft through tough times, including the company's implication in the scandal surrounding the United Nations oil-for-food program. Zarubezhneft was the top buyer of crude under the program, doling out almost $3 billion to Saddam Hussein's government, the report said.

If appointed to lead Transneft, he would oversee the company's swallowing of Transnefteprodukt, the state pipeline operator of refined products. Transneft carries all Russian crude production of 9.9 million barrels per day via trunk pipelines and exports around 5 million bpd to world markets.

"Recently, [Zarubezhneft] has expanded," Nesterov said, adding that the company was developing aggressively to put off takeover approaches. Its main assets are held in Vietnam and Central Asia. It also has a stake in the disputed West Qurna project in Iraq.

The appointment of Tokarev would be viewed as insignificant unless he pledged to improve corporate governance and boost dividends to minority shareholders, analysts agreed.

The state controls 75 percent of Transneft and all its voting shares. Private minority shareholders control the rest of the company through preferred shares.

"We're moving from a period where the state was interested in ownership structures, to the next phase, where emphasis will be on implementing investment strategies," said Chris Weafer, chief analyst at UralSib.

The Kremlin is also shaking up management at Sberbank, while rumors persist that longtime Rosneft chief executive Sergei Bogdanchikov may soon be replaced.

"There is a trend emerging of rotations of personnel at the state-controlled companies and it's likely to continue as part of the general succession realignment," said Denis Maslov, an analyst at Eurasia Group.