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from Stratfor.com
German energy mammoth E.On announced on Thursday a joint venture with Russian firm STS to jointly produce electricity in Western Siberia. The deal marks the commencement of a long-delayed smackdown that could well result in a dramatic reordering of the entire Russian political system (or maybe nothing more than one gentleman “falling” on a few bullets).
The deal comes from within the spider web of connections that make up Russian business and politics. Russian energy giant Gazprom has been trying to consolidate control of the Russian energy sector, and one of the top targets on its “to-assimilate list” is the country’s electricity-generating and transport network, which would include STS.
The powers behind Gazprom are First Deputy Prime Minister Dmitri Medvedev (a presidential candidate) and Russian President Vladimir Putin’s deputy chief of staff, Vladislav Surkov. Together they form one of the two factions within Putin’s inner circle. For Medvedev and Surkov, partnerships with German firms – specifically E.On – are a key plank in Russian foreign policy.
STS’s ultimate parent is Russia’s Unified Energy Systems (UES), the country’s largest – and only nationwide – electricity company. Under Russian law Gazprom must supply UES with natural gas to use as fuel to power electricity-generating plants at rates roughly one-sixth the amount that Gazprom charges its export customers in Europe.
And the CEO of UES is Anatoly Chubais, who is no ordinary Russian oligarch. Chubais was the architect of many of the economic reforms of the early 1990s that allowed the breakdown of the state and fostered the creation of the oligarchs in the first place. Terms like shock therapy, loans-for-shares and rigged privatizations are indelible scars on the Russian psyche in large part due to Chubais’ machinations. And though most accept that some of those early reformers like Yegor Gaidar actually were idealists trying to help, Chubais walked away with so many state assets that most everyone just thinks he was a crook (albeit a brilliant one) from the get-go.
To say that Chubais is hated in Russia is an understatement of a magnitude similar to saying that Americans do not care much for Osama bin Laden. Surkov blames Chubais (with considerable grounds) for most of what has gone wrong in Russia since 1991, and believes Chubais to be public enemy No. 1. And that was before Chubais demonstrated the temerity to cross swords with Gazprom.
So in Surkov’s mind, someone he considers a traitor has taken advantage of his company, policies and country – all to his personal, corporate and country’s detriment.
And it gets worse.
Chubais has been lying low ever since Putin became president in 2000, wisely choosing to steer clear of the Kremlin-oligarch fights that resulted. His move with STS and E.On is likely happening now because, after seven long years, he feels he has no choice but to act. UES is on the cusp of being broken up, and the Medvedev/Surkov-run Gazprom is well-positioned to snag the most pieces. If Chubais is going to have a place in Russia’s future, he needs to carve it out now.
Chubais has never thought small.
He is now gunning to get inducted into Putin’s inner circle – something that must make Surkov’s blood boil. Chubais’ logic is that not only is Gazprom already too powerful, but should Gazprom’s plans of dominating Russian electricity come to fruition it will become more powerful still. And if Gazprom is to be prevented from becoming all-powerful in the post-Putin power balance – something that concerns Putin a great deal – then the Energy Ministry needs to be in the hands of someone who is not only deeply aware of the electricity sector, but who also is creative, canny, crafty and connected.
Someone like Chubais.
Normally Putin would immediately reject Chubais’ approach. But though the president despises Chubais for who he is, what he has done and because he cannot trust him, the logic that Chubais is the perfect man for the job is unassailable.
Putin wants no faction to be all-powerful, so he must at least consider Chubais’ offer. This means the final decision on the issue is likely to come from the other major faction in Putin’s inner circle, Surkov’s counterpart and peer in the presidential administration: Igor Sechin. Sechin not only backs a rival candidate for president, Sergei Ivanov, but also a rival energy company, Rosneft. He, too, wants to see Gazprom defeated (or at least restrained). Sechin dislikes Chubais with a passion bordering on a coronary, but unlike Surkov, Sechin normally does not let his emotions cloud his long-term planning.
Should Sechin decide to tacitly back Chubais, mighty Gazprom is likely to find itself fenced-in by a man its controllers would like to dispose of. Should he not, then Chubais’ days as a Russian powerbroker could finally be coming to a long overdue – and high-speed, lead-induced – end.
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