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

. Last Updated: 07/27/2016

Rosneft President Losing His Allies

He made his first public appearance at Rosneft's inaugural shareholder meeting five months ago. Now, Igor Sechin, President Vladimir Putin's powerful deputy chief of staff and chairman of Rosneft's board, stands poised to consolidate control over the country's largest oil company, industry sources and analysts said Tuesday.

The exodus of three vice presidents from the company, confirmed late Monday, is the first in a series of firings that will rid the firm of those loyal to Rosneft president Sergei Bogdanchikov, several sources said.

"A leader left with no team is no leader, it means he's on the way out," said Alexander Temerko, a former vice president at bankrupt oil firm Yukos, referring to Bogdanchikov.

The shake-up comes on the heels of United Russia's electoral sweep in Sunday's State Duma elections, as the Kremlin turns its focus to choosing a presidential successor that will satisfy the competing clans that stand behind Putin.

"As the president said, those high-level bureaucrats who are representing the state in big corporations with state involvement will have to leave their posts," Kremlin spokesman Dmitry Peskov said. "Some will be replaced by others."

He declined to specify whether major changes would come before or after the March presidential vote.

Rosneft lost three vice presidents this week — Alexander Sapronov, head of refining and sales, Alexei Kuznetsov, vice president for strategic projects, and Valery Borisenko, head of information technology. The company said Sapronov, also a former Yukos vice president, resigned, while Kuznetsov and Borisenko retired, even though they fell short of retirement age.

Sources close to Rosneft have said that up to six vice presidents will resign in all. Nikolai Manvelov, the company's vice president for communications, declined to comment on further staff changes or the possible replacement of Bogdanchikov. "If such a decision is made, it will be made," he said.

Bogdanchikov, who built his career in the oil industry on Sakhalin island, was appointed president of Rosneft in 1998 by then-President Boris Yeltsin.

He has seen the company through its two defining eras — the acquisition of Yukos' production assets in bankruptcy auctions that closed this year and a July 2006 initial public offering in London that brought the firm to the global stage.

But if former Yukos managers, including former CEO Mikhail Khodorkovsky, are to be believed, it was Sechin who masterminded the strategy that brought the country's biggest oil producer to its knees, allowing its key assets to fall into state-controlled hands.

"This team took from Yukos, but it's [Sechin's] team who will live off of it," said Temerko, the former Yukos official.

Russian media have reported that further losses could include Dmitry Bogdanov, vice president for exports, chief accountant Sun Ne Kim and Anatoly Baranovsky, vice president charged with budget and fiscal regulation. Ramil Valitov, vice president for technical resources, who has been on vacation, is also rumored to be on the way out.

"This is not a question of business, but of something else," one source close to Rosneft said, referring to the changes.

Bogdanchikov has overseen the company's huge spending, which has left it saddled with $25 billion in debt. It spent $30 billion acquiring Yukos assets, taking a series of loans from a consortium of Western banks to cover the purchases.

The inaugural annual shareholder meeting in July, held one year after the company's $11 billion IPO, saw Sechin facing a barrage of questions from angry shareholders complaining that dividends did not match the firm's new value.

Sechin's rare appearance at the event, coupled with the unexpected resignation in March of Bogdanchikov's close ally first vice president Nikolai Borisenko, prompted speculation that Bogdanchikov could be on his way out.

Yet Bogdanchikov does not appear to have fallen afoul of the Kremlin, and he was talked of as a possible successor at Transneft when the pipeline firm's president, Semyon Vainshtok, resigned in September. Former Zarubezhneft president Nikolai Tokarev took up the post, in a further example of senior reshuffles at state-controlled companies.

Like Borisenko, who was appointed deputy presidential envoy to the Far East, Bogdanchikov could take up a government post if forced out of Rosneft, analysts said. "The changes in leadership are simply connected to changes in the political cycle," said Alexander Burgansky, an analyst at Renaissance Capital, adding that further changes in other companies were likely.

Sources and analysts dismissed speculation that the shake-up at Rosneft could signal that a wider restructuring of the oil industry was in store.

"In the long term, we certainly do believe in consolidation of the oil industry," Burgansky said. "But for the current government, over the next few weeks, to pull that off would be almost impossible.

"This has nothing to do with other companies," an oil industry source said. "It's an internal process within Rosneft, targeted, basically, against its leadership."

Yet unfinished deals remain. The Federal Anti-Monopoly Service said Tuesday that it had again put off, until next week, a decision to approve Oleg Deripaska's request to buy Russneft, the country's seventh-largest oil producer.

Russneft has been without an owner since founder Mikhail Gutseriyev fled the country in August after accusing state authorities of forcing him out.

Basic Element, Deripaska's holding, first applied for permission to buy the firm in September, but the decision has now been put off three times, most recently last week.

And TNK-BP is still waiting to formally hand over control of its flagship Kovykta gas field to Gazprom, which it sold to the state-run gas giant in June after months of pressure from state environmental officials. The deal was set at $700 to $900 million.

"It was delayed because of the due diligence process," TNK-BP spokeswoman Marina Dracheva said. Analysts have speculated that the deal was put off as Gazprom seeks a wider deal with TNK-BP that would involve buying out the company's Russian shareholders when a buyout clause opens up this month. Dracheva dismissed the idea as "pure market speculation."

A Gazprom spokesman refused to comment on possible changes in the leadership at the gas giant.

Another change could come as the country's leadership decides who will oversee the $148 billion stabilization fund. The official responsible for overseeing the fund, Deputy Finance Minister Sergei Storchak, was arrested on embezzlement charges last month.

Sergei Chemezov, who heads new state corporation Russian Technologies, suggested in September that the stabilization fund be used to provide credit for domestic firms. Chemezov, along with Sechin, is believed to be one of Putin's closest advisers.