Vladimir Putin’s relationship with the “Saddam Hussein of Russian business” says everything about how deals are done in the country.
Bloomberg’s Irina Reznik reports that Putin might takeover a private oil company’s $US34 billion cash pile — possibly in order to help bailout out the state-controlled oil mega-giant Rosneft.
The private oil company is Surgutneftegas (aka Surgut) and that cash pile was calculated by Bloomberg from data released on April 30.
Running Surgut is a reclusive guy named Vladimir Bogdanov, who’s known Putin since the early ’90s, rarely leaves his hometown of Surgut, and was once called the “Saddam Hussein of Russian Business” by investor Bill Browder, according to Bloomberg.
Rosneft has been seeking roughly $US25 billion from one of the Kremlin’s “rainy-day funds,” which the government simply can’t afford to give out right now.
Consequently, “an option that may be considered” is that Surgut would buy a 19.5% stake in Rosneft, which would enable financially-stretched Rosneft to pay for $US23.5 billion of debt coming due, Bloomberg sources say.
It might seem shocking that Surgut wouldn’t really put up a fight for its pile of cash, but it’s important to note that the concept of property rights in Putin’s Russia is quite different from that of the west.
“A prominent businessman … said that Mr. Putin had eroded the very notion of property rights in Russia, even for those who displayed fealty. He said that Mr. Putin himself had described private ownership of strategic industries with the Russia word to roost. ‘A chicken can exercise ownership of eggs, and it can get fed while it’s sitting on the egg,’ he said, ‘but it’s not really their egg,'” according to the New York Times.
And Surgut’s Bogdanov seems to playing along. He “believes that everything Putin does is right for Russia and says he’ll use the financial resources of Surgut, which he calls ‘the people’s company,’ in whatever way the president requests
,” Alexander Ryazanov, the formerly deputy head of Gazprom told Bloomberg.
“He knows he can’t use this money personally. He told me several years ago that he can only have the interest, which can be $US1 billion a year. He’s quite satisfied,” he added.
Notably, even though he’s run Surgut for three decades, Bogdanov officially owns less than 1% of Surgut’s stock, according to Bloomberg.
“He’s more like a very good hired manager than a co-owner,” said Ryazanov.
In other words — to use Putin’s own analogy — Bogdanov’s just a chicken sitting on someone else’s egg.