February 11, 2013 / 2:50 PM / in 5 years

UPDATE 1-Russia pipeline boss signals battle with traders, Summa

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By Melissa Akin

MOSCOW, Feb 11 (Reuters) - The head of Russia’s state oil pipeline monopoly, Transneft, signalled on Monday it was lining up for battle against private magnates who built their fortunes around the company’s export infrastructure.

The moves described by Transneft chief Nikolai Tokarev, depicted by Russia’s media as a former KGB spy who served with Vladimir Putin in Germany, target traders who have sold Russian oil to Europe using Transneft pipelines and have won lucrative contracts to build and renovate its vast network.

Russia’s biggest oil company, Rosneft, under Kremlin ally Igor Sechin, had already struck at traders operating on Transneft’s “Druzhba” pipeline, which extends from Russia to Germany, by signing several direct deals to supply customers such as Poland’s PKN Orlen.

“A team of traders has taken shape over the years who are middlemen between sellers and buyers. Usually they are dug in at the border, and that was how it was until recently,” Tokarev told the Kommersant business newspaper in an interview.

“LUKOIL battled them for nearly a year by not giving them any volumes,” he said, referring to Russia’s second-largest crude oil producer. “None of these little structures will remain. The final victory over that gang is near.”

By taking business away from those traders, Rosneft’s move - announced on Feb. 1 - already marked a significant redistribution of control over some of the largest, most stable flows of crude oil to Europe.

Among those to lose business on the Druzhba is Summa, whose trading arm Souz did not receive its usual volumes in January.

Tokarev also said the state monopoly had moved to reduce the influence of the Summa Group, the vehicle of magnate Ziyavuddin Magomedov, at Russia’s largest port group, Novorossiisk Commercial Sea Port Group.

State oilmen such as Tokarev and former military translator Sechin, both of whom worked with Putin in St Petersburg and moved on to government in Moscow as Putin rose to become president, look set to challenge Magomedov’s ambitions to buy state shares in the port group.

Like Putin, both Tokarev and Sechin project themselves as staunch defenders of Russia’s vital interests through their careful husbandry of its vast natural resources and, increasingly, its infrastructure.

In a profile by the Vedomosti newspaper on Monday, Tokarev was portrayed as a father figure to Putin during their time working for the KGB in the German city of Dresden.

“Almost all the residents in Dresden lived around one stairwell. Everyone left their doors open and everyone was constantly visiting,” a source who served with the two men was quoted as saying.

“Once we were at Tokarev’s and a pale, shy, quiet guy came in. ”This is Vova,“ Tokarev said”, the source recounted, using the diminutive for Vladimir and referring to Putin.

“Someone said, Vova, sit down, have a drink. ‘No,’ Tokarev said, ‘Vova doesn’t drink’.”


Russia privatised its oil industry, the world’s largest, under late President Boris Yeltsin in the 1990s, but around 40 percent of crude oil output will be in Rosneft’s control following the sale of BP’s Russian joint venture to state player Rosneft.

State commodity export infrastructure is now set for privatisation in the second round of major state sell-offs aimed at raising $20 billion for the budget.

Tokarev and Sechin have both opposed plans to sell some of those assets, including a stake in Novorossiisk group and a small one in Transneft itself.

Russian media quoted Russia’s state property chief, Olga Dergunova, as saying on Friday that 30 bidders were set to contend for the Novorossiisk stake.

Among Transneft’s quarrels with Summa, Tokarev said it had asked Transneft to offer cut-price logistics services under a plan to create a hub for trade in Russia’s Urals crude oil in Rotterdam at a Summa-built terminal. Vitol is a partner in the venture.

He also suggested Summa’s construction business, whose state construction contracts ranged from Transneft pipelines to renovation of the Bolshoi theatre, was no longer a major contractor for Transneft.

“In general we have had a whole series of conflicts with Summa,” Tokarev said. “This caused us to initiate a series of changes in the NCSP team.”

Tokarev said he backed a proposal by Rosneft to conduct a planned privatisation of a state stake in the port group by selling it to Rosneft because a sale to Summa would bring it too close to effective control.

“Transneft would end up back in the same situation we were in before we bought our (current) stake. We would not be able to deal with difficult issues or control the situation on the board. Yet again, we’d have to pull up a chair to the edge of the table,” he said. (Writing by Melissa Akin; editing by Lidia Kelly and Jason Neely)

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