Sechin and the Commanding Heights?

Though the Russian leadership denies that it is implementing state capitalism and affirms its commitment to privatization and competition, the state-owned oil giant Rosneft's takeover of TNK-BP is a bold statement to the contrary. Russia’s still-young market economy has now lost its last important bastion.

MOSCOW – The decision by BP and the Russian shareholders of TNK-BP to sell their stakes to Russia’s state owned Rosneft crowns a very successful year for the company – and for Rosneft CEO Igor Sechin. Before taking over TNK-BP – one of Russia’s major oil companies – Rosneft struck several multi-year investment deals. Earlier this year, Rosneft signed three agreements with ExxonMobil, Eni, and Statoil exceeding $700 billion in total – an amount that dwarfs all other recent foreign direct investment in Russia combined.

What a difference a year makes. In 2011, Rosneft agreed on a joint venture with BP, but TNK-BP’s Russian shareholders forced it to retreat from the deal. Now, Russian taxpayers will pay TNK-BP shareholders $45 billion in cash (and the rest in Rosneft shares). With this transaction, Sechin has built the largest publicly traded oil company in the world. What changed? And what implications does Rosneft’s takeover of TNK-BP have for Russian business?

Some observers are pointing to Sechin’s growing importance. But the Rosneft-TNK-BP deal should not be viewed simplistically as a realization of Sechin’s personal dream of building a national oil champion in Russia.

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