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Vasily Shestakov – Russia Intelligence n°70 of 31 January 2008).

In the early 1990s, Arkady Rotenberg founded, in St. Petersburg,

several companies specialized in trade and security. In June

1998, he became director-general of the foundation which man-

ages the Javara-Neva judo club. The foundation was initially

created by the co-founders of KINEX, Gennady Timchenko and

his old friend Andrey Katkov (Russia Intelligence n°6 of 11 Jan-

uary 2005). In other words, Arkady Rotenberg has been, for at

least the past ten years, a member of the Kiishi network, named

after the refinery in northern Russia which served as a spring

board for a number of businessmen tied to the Surgutneftegaz

oil firm (Vladimir Bogdanov) and Rossiya Bank (Yuri Kovalchuk).

According to our sources, Arkady Rotenberg met Viktor Zolo-

tov, Vladimir Putin’s head of security, as early as the late 1990s.

Arkady Rotenberg’s other source of access to the inner circle of

Russian power is Alexey Gordeev, the Minister of Agriculture.

He is allegedly responsible for having businessman Oleg Shus-

ter, reputed close to Vladimir Barsukov-Kumarin, the “god-fa-

ther” of St. Petersburg’s so-called Tambov mafia who was ar-

rested in the fall of 2007 (Russia Intelligence n° 61 of 13 September

2007), appointed to his cabinet. Due to his privileged ties to

Alexey Gordeev, Arkady Rotenberg placed two of his friends in

particularly lucrative positions — Sergey Zevenko at the head

of Rosspirtprom, the state-run spirits monopoly, and Alexan-

der Tugushev as president of Goskomrybolovstvo, the State

Fisheries Committee (Tugushev was relieved of his functions in

2004 and condemned in 2007 to a seven year jail term for cor-

ruption). 

The financial component of the Rotenberg brothers activities

is the SMP-Bank (Northern Maritime Passage Bank) which they

created in 2001. In November 2006, SMP-Bank acquired a block-

ing minority stake in Latvia’s Multibanka. As of 1 January 2008,

the Rotenberg’s bank disposed of assets of 

€500 million, rank-

ing it 116 among Russian firms.

Gazprom dismembered yet  again.

The acquisition of Gazprom’s

construction sector by the Rotenberg brothers is interesting in

and of itself but also because it confirms a trend that we have

regularly analyzed in these pages, i.e. the discrete distribution

of the gas company’s subsidiaries to Vladimir Putin’s cronies.

Until now those best served were affiliated to the Rossiya Bank.

The Sogaz insurance firm, followed by the Gazfond pension

fund, Gazprom-Media and finally Gazprombank, have all been

carved out of Gazprom to the benefit of Yuri Kovalchuk and his

friends (Russia Intelligence n°38 of 31 August 2006 and n°69

of 17 January 2008). Last April, it was Gazprom’s chemical com-

ponent, SIBUR’s, turn to become the object of a rather odd

transaction. It’s president Dmitry Konov, and four other top

managers announced that they had reached an agreement with

Gazprombank to buy its 70% stake in SIBUR. The operation is

based on an evaluation of SIBUR’s worth at $3.8 billion (while

most Moscow-based analysts estimate its worth at double that

amount) and which would be almost entirely financed by...

Gazprombank.

Although consolidating Gazprom and wresting it from the

Vyakhirev clan in 2001 is a founding moment of the “Putin Saga”,

it’s clear that two mandates later the gas giant has once again

been discretely pruned for the greater benefit of Vladimir

Vladimirovich’s friends.

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PROFILE

Arkady Rotenberg, A New Rising Star in the Putin

Network

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3 

Fetisov Leaps into Vladivostok

The director of the federal sports agency, Vyacheslav Fetisov, is

tipped to soon join the Federation Council as a senator from Vladi-

vostok. The operation was apparently initiated by Dmitry

Medvedev himself and will allow the Kremlin to kill two birds with a

single stone. On the one hand, it will settle relations – which were

becoming increasingly complex – between Vyacheslav Fetisov and

two other pillars of the Russian sports scene, minister Vitaly Mutko

and the head of the Russian Olympic Committee, Leonid

Tyagachev. On the other, it provides a minder for the troublesome

governor of Primorsky District, Sergey Darkin. 

The governor managed to save his post despite some trouble with

the law last spring (Russia Intelligence n°78 of 30 May), but he re-

mains on Moscow’s blacklist. During a September 1

st

visit to Vladi-

vostok, Vladimir Putin ostensibly ignored his host. The Russian prime

minister also showed his impatience with the delays in the construc-

tion of several large infrastructure projects needed to prepare for the

2012 APEC summit (the decision to call on a construction company

that is virtually unknown but that is close to Darkin to build the sus-

pended bridge to Russky Island is particularly criticized because it

could derail the entire project). Vladimir Putin has had to admit that

Russia may not be able to host the APEC summit, a cancellation that

would reflect badly on the country. Vice-prime minister Igor Shu-

valov has been appointed to monitor the large sums of public fi-

nancing which will pour into Primorsky District in the next few years

(

€8 billion for Vladivostok alone).

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The TNK-BP saga appears to be coming to an end. On Sep-

tember 4, following several months of a conflict on which we

have regularly reported in these pages, the British sharehold-

ers (British Petroleum) as well as the Russian ones

(Alfa/Access/Renova – AAR consortium) signed a memoran-

dum setting out the principals of a compromise. Taking into

account most of the demands of Viktor Vekselberg and his

partners while allowing BP to retain the essentials, i.e. prop-

erty rights, this agreement arrives spot on for the Kremlin.

In effect, it sends a strong signal to foreign investors at time

when the Moscow stock market is, at the very least, volatile.

On the political front, the accord should ease tensions in bi-

lateral relations with London, which is at the forefront of an

anti-Russian coalition in the wake of the war in Georgia.

Sacrificing Robert Dudley.

The memorandum signed on

September 4 includes several points discussed in late July in

London between Tony Hayword and Mikhail Fridman (Rus-

sia Intelligence n°82 of 28 August 2008). A target of the Russ-

ian shareholders, who claimed he managed the company for

the sole benefit of the British, TNK-BP president, Robert

Dudley, will resign his position by the end of the year. Keep

in mind that he had to leave Russia in mid-summer and was

managing from afar, a lopsided solution that could obviously

not endure. 

Under the compromise reached by BP and AAR, Robert

Dudley will be replaced by a manager endowed with a “rich

experience” in Russia and who speaks Russian. The new pres-

ident must be approved unanimously by the board.  Tony Hay-

ward said on September 4 that six candidacies have already

been received. The September 4 memorandum modifies some-

what TNK-BP’s mode of operation. The board will be com-

prised of eleven members (4 representing the Russian share-

holders, 4 representing the British and 3 independent board

members). The directorate will be reduced to 4-6 members,

down from fourteen currently. The new head of TNK-BP will

have less power than his predecessor: he will not be allowed

to name the board members of the group’s subsidiaries. 

Note also that the September 4 memorandum does not

ban competition between BP and TNK-BP (it’s known that

Robert Dudley vetoed several projects abroad promoted by

the Russian shareholders, particularly in Irak, and that this

cause discontent). The board will be able to approve invest-

ments in Russia up to $2 billion by a simple majority (previ-

ously, unanimous consent was required for all operations over

$50 million). 

Relief at the Kremlin, Gazprom on the lookout.

The Sep-

tember 4 memorandum satisfies BP, who feared losing all or

part of its stake in the joint-venture and whose share price

fell in recent weeks due to uncertainties about its reserves

in Russia. AAR, for its part, considers that it won the power

struggle. The only glitch, and it’s a major one, is that neither

Viktor Vekselberg nor German Khan should continue to hold

the posts of executive-directors (the British do not favor fill-

ing these posts with TNK-BP shareholders). 

OIL

TNK-BP: What is Behind the Compromise

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3

Gazprom Sets its Sights on Nigeria

In its 3 July 2008 edition Russia Intelligence pointed out

Gazprom’s growing interest in Nigeria. Events were propelled for-

ward when Abubacar Yar’Adua, president of NNPC, Nigeria’s na-

tional gas and oil company, recently visited Moscow. On Septem-

ber 3, he and Alexey Miller, head of Gazprom, signed a

framework agreement to create a joint-venture to develop com-

mon projects in the exploration, production and transport of natu-

ral gas as well as the optimization of “associated gas” in oil de-

posits, a major preoccupation of Nigerian authorities (to date, 40%

of this gas is burned in the country). Cooperation in the generation

of electricity is also included in the accord.

It’s easily conceivable that the future Nigerian-Algerian trans-sahar-

ian gas pipeline is among the projects to which Gazprom might be

associated. The 4300 kilometer pipeline with a drawing board ca-

pacity of 30 billion cubic meters/year, is expected to increase sup-

plies to southern Europe via Italy. It represents an investment esti-

mated at $13 billion and is scheduled to be operational in 2015.

Miller and Yar’Adua had previously discussed this project in June

during the Saint Petersburg Economic Forum and Gazprombank

experts are said to be working on feasibility studies already. Some

deposits in Ogoniland, in the Niger delta could also be of interest

to the Russians but security in the region is poor and Shell prefered

to pull out in the mid-1990s.

After Europe, Africa is more than ever a priority for Gazprom. By

looking to establish itself in Nigeria, Gazprom is seeking to com-

pensate for its failure in Algeria and for the slow pace of develop-

ment of Russian projects in Libya (Russia Intelligence n°76 of 24

April 2008).

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The Kremlin and the Russian government are satisfied

with the BP/AAR accord. Several hours after it was announced,

Arkady Dvorkovich, economic advisor to Dmitry Medvedev,

reiterated that Russia is interested in implementing major

projects through partnerships with foreigners, a message that

got somewhat drowned out in recent weeks by the belliger-

ent rhetoric of the Russian authorities. Igor Sechin, vice-

prime minister responsible for Energy, also expressed satis-

faction over the September 4 memorandum. Let it be said in

passing, that Dvorkovich’s and Sechin’s communiqués were

publicized by Mikhailov & Partners, which defends AAR’s

interests. It was apparently important to show that both the

Kremlin and Vladimir Putin’s entourage approved of the com-

promise. 

But the TNK-BP affair is not quite closed yet. The agree-

ment achieved between Hayword and Fridman opens the pos-

sibility of an IPO on 20% of the company’s capital (taken, in

equal parts, from the Russian and British stakes) probably

towards the end of 2009. Gazprom, which has long sought a

foothold in TNK-BP, could thus achieve its goal. This would

provide a conflict-free solution to the question of the huge

Kovytka deposit in the Irkutsk region?

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AIR CARRIERS

Chemezov, Luzhkov and Usmanov Outwit Aeroflot

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Russia’s air transport sector recently underwent what

might be classified as a “Big Bang”. A top flight industrial op-

eration was pulled off in the air carrier sector, in just a few

short days. The crisis at AiRUnion, the consortium of private

and public companies that was poised on the brink of bank-

ruptcy in early September, has spawned a new player that, in

terms of number of passengers, will lead the sector, out-dis-

tancing state-run Aeroflot. The difficult birth was ushered

in by the government to the satisfaction of two oligarchs close

to the center of power. Equally gleeful are Moscow’s mayor,

and to a lesser degree, the governor of Krasnoyarsk district.

The AiRUnion crisis began in mid-August when dozens of

flights were delayed in several Russian airports (Domode-

dovo, Krasnoyarsk, Omsk, Samara, Yuzhno-Sakhalinsk) due

to unpaid fuel bills. On August 21, the federal civil aviation

board, Rosaviatsiya, ordered the companies that make up

AiRUnion to stop issuing tickets, an apparent prelude to end-

ing all activity in the short-term. On the 25

th

, a creditor, leas-

ing firm IFK, began legal proceedings against AiRUnion’s ma-

jor subsidiary, KrasAir. At the same time, thousands of

passengers were stranded all over Russia. The affair became

more political on the 26

th

when Vladimir Putin instructed

Rosrezerv, the agency that manages strategic stock reserves,

to supply fuel to AiRUnion planes. Simultaneously, a flurry of

activity was going on backstage.

This isn’t the first time AiRUnion makes the headlines. In

our 15 December 2006 edition, Russia Intelligence analyzed

the power struggle between businessman  Boris Abramovich

(no relation to Roman, former governor of Chukotka) and

Aeroflot. At the time, the national carrier and its supporters

(including Viktor Ivanov) opposed the creation of the AiRUnion

holding with KrasAir at its core, seeing it as a potential com-

petitor. In the spring of 2007, Vladimir Putin nonetheless gave

the green light to Boris Abramovich’s project with the under-

standing that the state would retain a 45% stake in the new

group. At the time, Boris Abramovich was in favor with then-

president Putin. The buyout by an AiRUnion subsidiary of the

Hungarian carrier Malev was seen as an example of “eco-

nomic patriotism” and endorsed by the Kremlin (Russia In-

telligence n°48 of 2 February 2007). 

Yet, over the past few months, storm clouds gathered on

the AiRUnion horizon. The director-general of Rostekhnologii,

Sergey Chemezov, who wants to expand in the air carrier sec-

tor, convinced the Kremlin to include the state’s stake in

AiRUnion’s affiliated companies in his chaebol (Russia In-

telligence n°75 of 14 April 2008 and n°81 of 17 July 2008).

When the crisis exploded in August, it was understood that

Boris Abramovich would relinquish operational control of

AiRUnion to Rostekhnologii, but the details and the timetable

of the operation remained fuzzy. Sergey Chemezov indubitably

wants to takeover AiRUnion but does not want to assume its

debts (about $1 billion). Hence, the future shareholder was

in no hurry to advance fuel to AiRUnion when its planes be-

gan to be grounded. 

Holding back at first, the authorities didn’t begin manag-

ing the AiRUnion bailout until early September. Vice-prime

minister Sergey Ivanov was put in charge of the case. The

industrial solution finally adopted goes far beyond simply put-

ting the company afloat and transferring it to Rostekhnologii.

A new public carrier has been created which includes along

with AiRUnion, GTK Rossia, Kavminvodyavia (specialized in

flights to the north Caucasus), Vladivostok Avia (coveted by

Aeroflot) Saratov airlines and especially Atlant-Soyuz.  

Ranked Russia’s eighth carrier, the latter is controlled by

the city of Moscow through its mayor. The decision to include

Atlant-Soyuz in the new company was taken on September 3 at

a meeting between Sergey Ivanov and Yuri Luzhkov. The new

company’s hubs will be Krasnoyarsk and Vnukovo, also owned

by Moscow city-hall (according to several sources, one of the

main investors financing the modernization of the airport is Al-

isher Usmanov, head of Metalloinvest and of GazpromIn-

vestHolding). 

Within a few months, Rostekhnologii will own the top do-

mestic carrier with over 10 million passengers per year (versus

8 million for Aeroflot). The operation is another master stroke

for Sergey Chemezov and his partners. The future of AiRUnion’s

former directors seems, on the other hand, far less brilliant.

Some statements by authorities of the transport ministry and

Rostekhnologii management tend to suggest that quite a few

people prefer to place the blame for this summer’s crisis on

Boris Abramovich and to pick up, at bargain prices, his shares

in KrasAir and other AiRUnion companies.

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3 

Is Oleg Mitvol Teaming up with Oleg

Deripaska? 

The oft-in-the-news deputy head of Rosprirodnadzor, the fed-

eral environmental protection agency, is about to be shown the

door, as RI predicted back in February (Russia Intelligence n°72

of 28 February 2008).  On September 9, Oleg Mitvol received

official notification of his sacking. He was scheduled to meet

with his supervising minister, Yuri Trutnev, once the latter re-

turned from the Irkutsk Economic Forum.

His departure comes as no surprise. The new head of

Rosprirodnadzor, Vladimir Kirillov, a St. Petersburg native

close to Viktor Zubkov and Sergey Mironov (Russia Intelli-

gence

n°70 of 31 January), saw no need to maintain a maverick

such as Oleg Mitvol on his team. Oleg Mitvol has drawn the

spotlight over the past few years for his role in several highly-

publicized events. He was in charge, in the autumn of 2006, of

the governmental expertise which led to Shell’s failure in the

Sakhalin-II project. He also attacked the owners of dachas built

in green zones around Moscow. 

According to some sources, Oleg Mitvol could join Rusal. If this

information is confirmed, it would indicate, as reported in these

columns in our 28 August edition, that Oleg Deripaska does

have the intention of making respect for the environment a rally-

ing point in his struggle against Vladimir

Potanin at Norilsk Nickel.

d

A biography of Oleg Lvovich Mitvol is availa-

ble in Russia Intelligence n°42.

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Oleg Mitvol

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PIPELINES

South Stream vs Nabucco : Moscow Scores Some Points

European Union officials are constantly emphasizing the need

for an approach coordinated with Russia for dealing with energy

issues, yet Gazprom continues to march on to its own distinct

drummer. On September 2, in the wake of the EU extraordinary

summit on the Georgian crisis and just before the “Gymnich”,

an informal meeting of EU foreign affairs ministers held in Avi-

gnon on September 5-6, the Greek parliament ratified, by 264

votes out of a possible 300, a bilateral agreement signed in

Moscow at the end of April. The accord provided for Greek par-

ticipation in the South Stream gas pipeline, a project proposed

by Gazprom and the Italian ENI. Next, on September 9, the Serb

parliament approved a gas cooperation accord initially signed

at the beginning of the year between Boris Tadic and Vladimir

Putin (Russia Intelligence n°70 of January 31 2008). 

The January 25 bi-lateral agreement is comprised of two com-

ponents. It includes a 400 km portion of the future South Stream

gas pipeline. Gazprom has also committed  to finishing the con-

struction of the Banatsky Dvor stock reservoirs. A supplemen-

tal protocol details the acquisition of Naftna Industrija Srbija

(NIS), the national gas and oil company, by Gazprom neft. The

Russian firm is set to pay out 

€400 million to pick up 51% of NIS

and has committed to investments of a further 

€500 million. Con-

cluded between the two stages of the Serbian presidential elec-

tion, the agreements are the economic counterpart to Russian

diplomatic support for Belgrade over the issue of Kosovo’s in-

dependence. Although officially signed by Boris Tadic, the agree-

ment is first and foremost the result of pro-Russian lobbying by

then-prime minister, Vojislav Kostunica. The former prime min-

ister’s defeat in early elections held last May raised fears in

Moscow that the Gazprom/NIS accord would not be implemented

(Russia Intelligence n°77 of May 13 2008).

The main opponent to tighter Russo-Serb ties in the gas sec-

c

tor is Mladjan Dinkic, minister of the economy and of re-

gional development. At his request, Deloitte  & Touche this

summer conducted an audit of NIS. It showed that the Ser-

bian firm –which owns two refineries at Panchevo and Novi

Sad and which controls 72% of the domestic raffinats market

– is worth 

€2.2 billion. Based on this estimate, the Serbian

government decided to raise the stakes. On the eve of the Ser-

bian parliamentary vote, Gazprom lobbyists such as Predrag