Announcements last week from Prime Minister Vladimir Putin indicate that the movement of Russian oil for export is now to be supervised by Putin's former chief Kremlin aide, Igor Sechin, who was named deputy prime minister in charge of Russian industry on May 12.  

Sechin is also to take over the entire maritime policy concession from other officials, in an ambitious bid to concentrate oil trading in Russian hands; create new Russian oil ports on the Baltic; and build a new generation of oil and gas tankers in Russian yards, which have hitherto lacked the technical capacity.

The ambition has already attracted ferociously negative reporting from the international media, which accuse Sechin, as well as Putin, of being in league with Gunvor, the Geneva-based oil trader controlled by Gennady Timchenko, who has influential business, friendship, and family ties in the Russian maritime sector. 

The Financial Times has led the charge, claiming there is something suspect in the secrecy of Swiss-based oil traders, even if Gunvor's larger competitors in the international oil market, Glencore and Vitol, are equally Swiss, and not less secretive.

On 2007 estimates -- unaudited and untested, since all three are privately incorporated, and do not publicly issue financial reports -- Glencore reported revenues (including oil and non-oil trading) of $142 billion. Vitol says that in the same period it generated revenue of $100 billion; while Gunvor reported $43 billion. This year, Gunvor is projecting revenue of $70 billion.  Gunvor restricts itself, for the time being, to crude and oil products. Vitol is mostly an oil trader, with some natural gas and LPG. Glencore has production and trading stakes in metals and minerals; coal; grains, sugar and oilseeds; as well as oil.  

The London media reports claim there is something morally, commercially, and possibly even criminally suspect in the Russian attempt, backed by the Kremlin, to extract profit multiples out of unifying Russian production, trade, and shipment of oil (and other energy products). Just five years ago, the same media backed Mikhail Khodorkovsky, convicted owner of the dismantled Yukos oil group, and his fellow Moscow-based oil oligarchs, when they attempted to do exactly the same thing and consolidate their stakes with US or UK oil companies.

They could not have done this without very powerful political connections, the FT recently quoted an investment bank analyst in Moscow regarding Gunvor, implying that the Soviet state monopoly of oil production, trading and shipping  should not be allowed a comeback -- and certainly not at the expense of Khodorkovsky and his associates. 

A must read, according to Robert Amsterdam, Khodorkovsky's attorney outside Russia, regarding the shadowy Geneva-based...Gunvor, and complaining that such a small company was able to achieve this improbable level of growth.

The appointment of Sechin, a former KGB officer, to supervise all Russian industry has confounded predictions that the newly installed President Dmitry Medvedev might sideline the man believed to be Putin's most powerful advisor, and chairman of Rosneft, the state oil company which took over Khodorkovsky's Yukos assets. 

Sechin has also taken over from Sergei Ivanov, the former defence minister and unlucky presidential candidate, who supervised ports and shipping in the outgoing cabinet. Sechin has also been named chairman of the state shipbuilding corporation, OPK. Until now, OPK has been in limbo, without leadership or budget; and facing resistance from the existing commercial interests who own the St. Petersburg yards, Severnaya Verf (Northern Shipyard), and Baltiysky Zavod (Baltic Plant).

Since the end of the Soviet Union in 1991, the big drawback for Russian shipyards has been their lack of investment and vessel orders. Costs, tax incentives and bank loan terms have favoured foreign shipbuilders. Although for a time the Russian oil oligarchs controlled domestic shipyards and tanker fleets, they were never interested to provide the investment required to increase the size of the tankers they could build. The result today is that Russian fleet managers still prefer to place their tanker newbuild orders in South Korea, Croatia, Germany, Scandinavia, or elsewhere.  

Sechin will also now have de facto clout over Igor Shuvalov, Putin's G8 sherpa. The latter has been promoted one rank above Sechin's to first deputy prime minister in charge of Russia's international economic relations, but the new power vertical isn't likely to see Shuvalov telling Sechin what to do. Shuvalov has also been chairman of Sovcomflot, the wholly state-owned tanker company now in process of consolidating its state controlled rival, Novorossiysk Shipping Company (Novoship). Shuvalov may stay on the Sovcomflot board;  but it will be Sechin, and Putin,  who will call the tune over oil cargo chartering, and new tanker orders.

Sechin's continuation as chairman of the state owned oil producer and exporter, Rosneft, will be considered on June 5, when Rosneft holds its annual general shareholders' meeting. In his report to shareholders, Sechin said last week: The results of Rosneft's work in 2007 vividly disprove opinions that it is impossible to achieve high efficiency in companies where the state is a majority owner. In a vote of confidence in him, the Moscow stock market bid up Rosneft's share price by 12% in the week following the news of Sechin's new appointments. 

Rosneft, Russia's leading oil producer and exporter, has a current market capitalization of $112 billion, with an international free float of 15%.  It has proved reserves of 22 billion barrels of oil equivalent. Roughly one barrel of Russian crude in four now comes from Rosneft.

In remarks on maritime strategy in St.Petersburg last week, Putin said he wants to increase the flow of Russian oil exports, on Russian built and owned tankers, from Russian oil terminals along the Baltic coast. This has been the Kremlin's objective for several years. But never before has such a high-profile official been put in charge, and the shipbuilding and port construction integrated with state-controlled oil production at the wellhead, overland transport, and oil trading. 

At the same time, Timchenko's Gunvor group is increasing its share of the rising volume of Russian exports of both crude and petroleum products. Gunvor is believed to be cooperating with Zarubezhneft (Foreign Oil), a state owned oil company, in the planning for a new 11-million tonne capacity oil terminal at Ust-Luga, on the Gulf of Finland. Gunvor has more than tripled its share of Russia's crude exports in the past five years; it currently has a 30% share, and growing.

Transneft, which controls Primorsk, the first of the new Russian oil ports on the Baltic to end Russian reliance on the ports of Lithuania, Estonia, and Latvia, had been reluctant to deliver oil to Ust-Luga,  until the former Zarubezhneft executive Nikilai Tokarev took over at Transneft last October. Putin made clear last week that Transneft's resistance was over. The management of the Ust-Liga port company confirmed that the new spur, linking the main Transneft trunkline to the Ust-Luga tanker loading terminal, has been given Putin's go-ahead. 

While the trading and shipping units of the oligarch-owned groups have been the obvious losers in these shifts of infrastructure and investment, Glencore appears to be the biggest of the international losers. After being pushed out of asset or trade positions it had taken in steel and aluminium, at early-1990 discount, Glencore's sole major oil stake, in the Russneft production and refinery group has been frozen by the Russian anti-trust regulator; apparently with a large amount of partner Oleg Deripaska's cash stuck in escrow. Separately, Glencore's alumina alliance with United Company Rusal has also failed to generate the asset value gains that were anticipated when they merged in October 2006. Both positions now come under Sechin's supervision.

The next time a London newspaper asks you to snort righteously at the fate of the Yukos concession, don't forget to shed a sad tear for Glencore, too.