Russian President Vladimir Putin seized the opportunity of his first meeting with members of an energy advisory council on Tuesday to reaffirm his commitment to the government's ambitious privatization program. In the past, the Russian president has always emphasized the importance of energy to national wealth and power, and seemed to support those seeking to maintain the state's tight grip on the country's natural resources. But since returning to the Kremlin in May, president Putin has been trying to assure energy-industry executives and private investors that his administration will not backpedal on the proposed sale of shares in state-owned energy companies proposed by his predecessor.

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President Putin also used Tuesday's meeting to put an end to speculation about the role of the two government commissions overseeing the country's energy sector. Putin appointed former Presidential Aide Arkady Dvorkovich as deputy prime minister in May with overall responsibility for the energy sector. However, Igor Sechin, a Kremlin heavyweight, was also made secretary of a new energy commission under the chairmanship of president Putin in June. Putin said at the beginning of Tuesday's meeting that the other commission, which he chairs, will not assume the responsibilities of the government. All its work will be carried out "with the direct involvement of the White House, which will eventually make the final decision on several issues," Putin said.

Observers think that Sechin, who favors state control of the economy, is creating the energy commission to help him make crucial decisions while bypassing the government's approval. He had backed a plan, opposed by the government, to take state energy and infrastructure assets under control of the state-run company Rosneftegaz, the main shareholder of the oil company Rosneft and a large shareholder of the gas giant Gazprom. He is also credited with securing a presidential decree in May that would enable state-owned Rosneftegaz to buy stakes in fuel and energy companies slated for privatization and that "need recapitalizing for their development." Analysts have named the Federal Grid Company, Inter-District Grid Company Holding and RusHydro as the likely targets for such quasi-privatization.

President Putin seemed to have watered down the decree on Tuesday, telling top officials and energy executives that Rosneftegaz should not be the only contender in the planned sale of government-controlled energy assets. "The government will continue on its course of privatizing state-owned assets in the framework of previously adopted decisions. I want to emphasize that," Putin the meeting that included the president of Alliance Group Musa Bazhaev, Russneft oil company mogul Mikhail Gutseriyev and TNK-BP Executive Director German Khan. "Of course, the participation of Rosneftegaz in the acquisition of state-company shares cannot be called privatization in a direct sense. This doesn't mean that we should limit ourselves to the participation of only Rosneftegaz in privatization," the president added.

Putin cautioned, though, that when privatizing energy companies' assets, special attention must be paid to "issues related to energy security," as well as "the special importance of the fuel and energy complex's contribution to the budgeting process." Russia, he said, has largely liberalized its policy on the fuel and energy sectors, with 25 percent of the sectors currently owned by foreign companies. "Russian oil and gas companies operate in global energy markets and are more often the leaders in attracting foreign investment. So, today, about 25 percent of the sector is in the hands of foreign investors," Putin said. He added that similar liberalization is hard to come by in many countries where energy resources play a crucial role in the economy.

Under a revised privatization plan approved by the government in June, the government should completely sell off its stakes in energy companies, including state-owned Rosneft, oil producer Zarubezhneft and renewable energy producer RusHydro. In a nod to Sechin, Putin agreed that RusHydro shouldn't be sold on the cheap. The government plans to recapitalize RusHydro through a share-offering to fund modernization projects, with Rosneftegaz seen as a potential investor, the Wall Street Journal reported. "In the coming years, the capitalization of the company will grow to $40 billion. But we can't simply sell today for $7.5 billion what clearly will be worth $40 billion tomorrow," Putin said.

The president also sounded a hopeful note about his prospects for the country's modernization and departure from a resource-based economy. "It is certainly true when people say that we are all sitting on the oil and gas needle. It's also true that we need to develop high technology," Putin said. "But we must not forget that the current oil and gas industry is just as high-tech as any other. Both extraction and processing rely on modern equipment, based on new and ultra-modern, energy-efficient and energy saving technologies," Putin said.

Keywords: Russia, Economy, Business, Investment, Privatization - Russia, Oil, Gas, Energy - Russian News - Russia

Russian President Vladimir Putin seized the opportunity of his first meeting with members of an energy advisory council on Tuesday to reaffirm his commitment to the government's ambitious privatization program. In the past, the Russian president has always emphasized the importance of energy to national wealth and power, and seemed to support those seeking to maintain the state's tight grip on the country's natural resources. But since returning to the Kremlin in May, president Putin has been trying to assure energy-industry executives and private investors that his administration will not backpedal on the proposed sale of shares in state-owned energy companies proposed by his predecessor.

file photo
President Putin also used Tuesday's meeting to put an end to speculation about the role of the two government commissions overseeing the country's energy sector. Putin appointed former Presidential Aide Arkady Dvorkovich as deputy prime minister in May with overall responsibility for the energy sector. However, Igor Sechin, a Kremlin heavyweight, was also made secretary of a new energy commission under the chairmanship of president Putin in June. Putin said at the beginning of Tuesday's meeting that the other commission, which he chairs, will not assume the responsibilities of the government. All its work will be carried out "with the direct involvement of the White House, which will eventually make the final decision on several issues," Putin said.

Observers think that Sechin, who favors state control of the economy, is creating the energy commission to help him make crucial decisions while bypassing the government's approval. He had backed a plan, opposed by the government, to take state energy and infrastructure assets under control of the state-run company Rosneftegaz, the main shareholder of the oil company Rosneft and a large shareholder of the gas giant Gazprom. He is also credited with securing a presidential decree in May that would enable state-owned Rosneftegaz to buy stakes in fuel and energy companies slated for privatization and that "need recapitalizing for their development." Analysts have named the Federal Grid Company, Inter-District Grid Company Holding and RusHydro as the likely targets for such quasi-privatization.

President Putin seemed to have watered down the decree on Tuesday, telling top officials and energy executives that Rosneftegaz should not be the only contender in the planned sale of government-controlled energy assets. "The government will continue on its course of privatizing state-owned assets in the framework of previously adopted decisions. I want to emphasize that," Putin the meeting that included the president of Alliance Group Musa Bazhaev, Russneft oil company mogul Mikhail Gutseriyev and TNK-BP Executive Director German Khan. "Of course, the participation of Rosneftegaz in the acquisition of state-company shares cannot be called privatization in a direct sense. This doesn't mean that we should limit ourselves to the participation of only Rosneftegaz in privatization," the president added.

Putin cautioned, though, that when privatizing energy companies' assets, special attention must be paid to "issues related to energy security," as well as "the special importance of the fuel and energy complex's contribution to the budgeting process." Russia, he said, has largely liberalized its policy on the fuel and energy sectors, with 25 percent of the sectors currently owned by foreign companies. "Russian oil and gas companies operate in global energy markets and are more often the leaders in attracting foreign investment. So, today, about 25 percent of the sector is in the hands of foreign investors," Putin said. He added that similar liberalization is hard to come by in many countries where energy resources play a crucial role in the economy.

Under a revised privatization plan approved by the government in June, the government should completely sell off its stakes in energy companies, including state-owned Rosneft, oil producer Zarubezhneft and renewable energy producer RusHydro. In a nod to Sechin, Putin agreed that RusHydro shouldn't be sold on the cheap. The government plans to recapitalize RusHydro through a share-offering to fund modernization projects, with Rosneftegaz seen as a potential investor, the Wall Street Journal reported. "In the coming years, the capitalization of the company will grow to $40 billion. But we can't simply sell today for $7.5 billion what clearly will be worth $40 billion tomorrow," Putin said.

The president also sounded a hopeful note about his prospects for the country's modernization and departure from a resource-based economy. "It is certainly true when people say that we are all sitting on the oil and gas needle. It's also true that we need to develop high technology," Putin said. "But we must not forget that the current oil and gas industry is just as high-tech as any other. Both extraction and processing rely on modern equipment, based on new and ultra-modern, energy-efficient and energy saving technologies," Putin said.