Lukoil is looking where deeper... in America? The scandal with Bashneft and Lukoil continues “Farewell, unwashed Russia...”.

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Subbotin Valery Sergeevich (born in 1974, Tyumen, Khanty-Mansi Autonomous Okrug, RSFSR, USSR) - top manager of the oil company LUKOIL. In 1996 he graduated from Tyumen State University. In 1996-1998 he studied at Anglia Business School, Cambridge (UK), received the title of Master of Business Administration.

In 1998-2000 - financial analyst, financial manager of LUKOIL-Prague. In 2000-2001 - Deputy General Director of LUKOIL-Bulgaria. In 2001-2002 - financial manager of the Moscow representative office of the Swiss trader LUKOIL Litasco. In 2002-2003 - Deputy General Director of LUKOIL Pan-Americas (USA). In 2003-2005 - First Deputy Head of the Office of the Board of Directors of LUKOIL. In 2005-2007 - First Deputy Head of the Main Department of Supply and Sales of LUKOIL. From October 2007 to February 2017 - Vice President-Head of the Main Supply and Sales Department of LUKOIL. Since February 2017 - Chairman of the Board of Directors of the international trader of LUKOIL - Litasco.

How a Lukoil trader took a prominent place in the oil trading market

Rosneft terminated Bashneft's major contract with LUKOIL ahead of schedule

Two weeks after purchasing a controlling stake in Bashneft, Rosneft decided to terminate its agreement with LUKOIL on the purchase of oil for three Ufa refineries and the sale of petroleum products. The total amount of these agreements was about 400 billion rubles.

Will Alekperov follow Yevtushenkov?

After the arrest of the owner of the Sistema holding, Vladimir Yevtushenkov, the state can also present its claims against the main shareholder of Lukoil, Vagit Alekperov.

MOSCOW (Reuters) - Russia's largest private oil company Lukoil has replaced its vice president for oil supplies and sales amid complications in its relationship with state-owned Rosneft, three sources familiar with the situation told Reuters.

Lukoil logo at a gas station in Moscow. Russia's largest private oil company Lukoil has replaced its vice president for oil supplies and sales amid complications in its relationship with state-owned Rosneft, three sources familiar with the situation told Reuters. REUTERS/Maxim Shemetov

According to them, Valery Subbotin, owner of 0.0152% of Lukoil shares, who worked in the company for 18 years, including the last nine as vice president, is moving to a management position in Lukoil's trading company, Litasco, and his place has already been taken by Vadim Vorobiev, who was previously Lukoil's vice president for oil refining, petrochemicals and gas processing.

The Lukoil press service refused to comment on personnel changes in the company. Reuters tried to contact Subbotin by phone and by email, but he did not respond.

Lukoil is the largest private oil company in the Russian Federation and the second largest oil company in the country after Rosneft. Both are major and active players in the Russian oil market, whose interests have clashed more than once in different segments, be it the struggle for fields, assets, or buyers of oil and petroleum products.

Over the past two months, Rosneft, led by Igor Sechin, a longtime ally of Russian President Vladimir Putin, has made a number of major transactions, including the acquisition of Lukoil partner Bashneft, the purchase of a stake in India's largest oil refinery Essar and the sale of shares in Rosneft itself.

Sechin was able to quickly secure the sale of 19.5 percent of Rosneft to the sovereign fund of Qatar and the trader Glencore, gaining 10.5 billion euros desperately needed by the Russian budget. And although observers doubted the effectiveness of the deal, Putin praised the efforts of the head of Rosneft, who responded by saying that the deal was only possible thanks to Putin's personal contribution.

Earlier, during the process of annexing Bashneft, Sechin managed to overcome resistance to the deal in the highest echelons of power.

Thus, the former Minister of Economic Development of Russia Alexey Ulyukaev, who was arrested on November 15 on charges of corruption, in July called Rosneft an “improper buyer” for Bashneft, Russian state agencies reported.

One of Reuters’ sources linked Subbotin’s departure with the consequences of Lukoil’s loss of the fight with Rosneft for a controlling stake in Bashneft.

“Lukoil worked closely with Bashneft, really wanted to buy it, but Rosneft, it turns out, stood in the way, and after the deal it immediately began to reshape the oil sales scheme, naturally, not in favor of Lukoil. There cannot be good relations here,” said one trader on the Russian oil market.

Subbotin was responsible at Lukoil for building the company’s trade policy in the domestic market and in the supply of oil for export.

On October 12, 2016, Rosneft press secretary Mikhail Leontyev said on the Dozhd TV channel that Rosneft has a lot of questions for Bashneft and its operating activities, including issues related to the sale of oil between Lukoil and Bashneft

Rosneft, in response to a Reuters request, said that “logistical support for Bashneft’s assets will be carried out primarily based on economic feasibility. The company currently has an active contract. Changing its parameters is possible - based on the requirements of its business plan, Rosneft will determine the optimal supply routes for its products.”

NO CONSENT

During the privatization of Bashneft, Lukoil ceded the asset to Rosneft and practically left the race by the time the decision was made to sell the stake. After gaining control over Bashneft, Rosneft approached with particular care the termination of all contracts of the Bashkir company with Lukoil.

Thus, since November, Rosneft stopped purchasing oil from Lukoil for the Bashkir refineries of Bashneft, although Lukoil was the largest supplier, shipping about 500,000 tons of oil per month.

At the same time, Rosneft did not terminate the contract for the supply of oil to the Bashkir refineries with Gazprom Neft, although the volume of purchases under this agreement was significantly lower - less than 50,000 tons per month.

An unresolved issue after the merger of Bashneft with Rosneft remains the scheme for marketing oil from the fields named after. Trebs and them. Titov, the operator of which is Bashneft-Polyus, in which Bashneft owns 74.9 percent and Lukoil - 25.1, traders say.

Oil from the fields enters the Kharyaga-Varandey pipeline to the Varandey terminal, the entire infrastructure belongs to Lukoil, and is shipped as part of the Varandey Blend. Since the beginning of supplies, Litasco has been marketing raw materials.

The contract for supplies to Litasco is valid only until the end of 2016, but there are currently no alternative routes for supplying oil from Trebs and Titov, industry sources say.

“Rosneft doesn’t have many options: either peacefully continue to cooperate with Litasco and use Lukoil’s infrastructure, or try to buy out the entire infrastructure in Varandey, although Lukoil is unlikely to want to sell it,” says an industry source.

According to him, in the last month it has been the export of oil from Trebs and Titov that has been the most pressing issue in relations between Rosneft and Lukoil.

“It seems that everything is complicated with Trebs: deadlines are running out, Sechin does not want to supply oil through Lukoil at all, but there are no alternatives, just as there is no money. The field is in an active development phase, if production is stopped due to disagreements, it will be a failure,” said one industry source familiar with the negotiations.

Market participants also fear that a change in the top manager responsible for oil supplies could cause a reduction in supplies of raw materials to the domestic market of the Russian Federation.

“Lukoil sent a lot of oil to the domestic market, and now it is unclear whether these supplies will be reduced or not. Now, in any case, those companies that worked with Lukoil under replacement schemes received nothing as of January,” said one of the traders.

Senior Vice President of the company Valery Subbotin will head the international company Litasco. Is Vagit Alekperov withdrawing assets?

At the beginning of February, large-scale personnel changes took place at Lukoil. One of them is the departure of the company’s senior vice president for supplies and sales, Valery Subbotin. He will head Litasco, an international trader for Lukoil.

According to sources from the Lukoil company, Valery Subbotin has long been ready to say “good bye” to Russia, since he has already applied for US citizenship and even received a green card. And his family had long said goodbye to their homeland. And Subbotin himself spends more time in Switzerland than in Russia. From Switzerland, he runs the trading company Lucoy-Litasco.

In principle, Lukoil has long fine-tuned its management of international assets. And he does this with the help of the company Lucoy Overseas, registered in the British Virgin Islands. For some reason, the company’s office is located not in Moscow, but in the UAE. And this despite the fact that Lukoil positions itself as a national company.

What kind of shift happened in the minds of the Lukoil management then? Where do such pro-Western sentiments come from? And everything, it turns out, is simple. On January 13 of this year, America extended sanctions against individuals and companies from Russia for a year.

And if most companies, taking into account the sanctions, develop their business within the country, then Lukoil, apparently, decided to make a knight’s move - to move its business abroad. And nowhere, but to America itself. So, it is quite possible that we will soon learn about the new company Lukoil-America.

It cannot be said that this will be such a surprise, since the owners of Lukoil Vagit Alekperov and Leonid Fedun not only have business abroad, but also constantly transfer assets there.

Lukoil is looking for where to go deeper

The co-owners of Lukoil already have an American business - the Panatlantic Exploration company, which they acquired back in 2010. The chairman of the board of directors of the company is Olga Plaksina, who is also the chairman of the board of IFD Capital, which manages the assets of Lukoil.

Panatlantic Exploration is involved in deep-sea drilling. Business is capital intensive. The cost of one well is about $100 million, and the chances of success are 30%. The company's office is located in Houston, the American oil capital. Lukoil's investments in the company have already exceeded $100 million.

The operational management of the company is carried out by Leonid Fedun. According to experts, such projects are not assessed in a year or two, but are designed for decades. Apparently, Alekperov and Fedun back in 2010. Before the sanctions, we seriously and permanently decided to move to America. And they prepared a new springboard for this.

Leonid Fedun

Offshore childhood of Lukoil

The first offshore company appeared among Lukoil shareholders back in 1999. Before this, the company’s shareholders were quite transparent - the state, companies affiliated with Lukoil itself, investment banks and the American company ARCO. Maybe the owners of the company developed a love for America already at that time?

And if America is a controversial issue, then Lukoil’s offshore life began right then. The company was called Reforma Investment, it owned 9% of the shares.

The Lukoil executives themselves threw up their hands in bewilderment. Like, we have no idea what kind of company this is. Behind it is a pool of some unknown investors. However, everything said that everything was well known to everyone.

Only one application was submitted to the competition, since the second applicant offered only $1000 higher than the starting price, which suggests that the result of the competition was a foregone conclusion.

What reasons forced Lukoil to hide the true buyer of its shares? Probably no one will ever know about this. But one thing is clear that even then Lukoil entered into offshore life. And then she healed to the fullest.

Is Lukoil moving offshore?

The withdrawal of money to offshore companies by Lukoil is also not new. Back in 2014 the company published reports according to which for the year the company's net profit decreased by almost 40%, and revenue from projects increased by 2%. How can this be? Profits are down, but revenue is up.

Experts explain this by “optimizing” the tax base. At the same time, Lukoil’s top management is increasing its shares, again buying out the company’s American depositary receipts. At the same time, investment programs are being reduced. And all this, of course, increases dividends in dollars.

All this is reminiscent of the behavior of the owners of TNK-BP, when before the sale of Rosneft they got rid of their assets. Now the management of Lukoil is doing the same. But for now there is no talk of any sale of it in Russia.

It is also interesting that by investing huge amounts of money in the dubious West Qurna-2 project, Lukoil is freezing the work of the Ukhta Oil Refinery, which has existed since 1934. What neither the war, nor perestroika, nor crises could achieve, the Lukoil management successfully accomplished. And it doesn’t matter that Vagit Alekperov promised not to lay off staff. He took and deceived people.

Lukoil plans to spend 60% of its profits on paying dividends, that is, management actually pays money to itself, which experts call “hidden remuneration.” The fact that in 2013 is also alarming. top management received a salary of 3 billion rubles, and in 2014 at 1.5 billion rubles. Have you come up with clever schemes to avoid the light?

According to various estimates, Lukoil back in 2014. transferred about $5 billion to offshore companies. In addition, it turned out that, with some joy, some Cypriot companies LUKOIL Employee Limited and Lukoil Investments Cyprus Ltd owned 11% of the company’s shares. Why would they receive such an honor? The excuse is the presence of Lukoil gas stations on the island. But they are available all over the world; for some reason Lukoil does not offer a share to other countries.

Lukoil also refuses to disclose oil refining margins. Why? But because some of its factories are located in Italy. And it is beneficial for the company for the money to be deposited in the accounts of foreign banks.

Goodbye, Russia?

When its citizens leave a country, it can be considered a personal matter for everyone. A person will always look for where it is better. When a large private company plans to leave the country, then this is already a state problem.

Lukoil is also looking for where it is better, or rather, where it is more profitable for it to conduct its business. And she doesn’t care how the country’s economy will develop or whether it will develop at all. It seems that Vagit Alekperov and Leonid Fedun don’t care about anything other than profit. Or are they afraid that they will be swallowed up by Rosneft?

Be that as it may, this situation demonstrates that even large private businesses do not feel social responsibility. You can freeze the work of the plant, you can make empty promises, you can “optimize” tax schemes so as not to pay these taxes to the budget. You can withdraw money to offshore companies, regardless of the demands of the country’s leadership on deoffshorization.

How to fix the situation? And is this possible? Probably, possible. Only other people will already do this. Who will think and act completely differently from the Lukoil management.

Starting January 20, the new White House administration headed by Donald Trump will begin its duties in Washington. But on Friday, January 13, outgoing President Barack Obama extended for another year his Executive Order No. 13660 of March 6, 2014, through which the American administration imposed sanctions against individuals and companies from Russia.

One of the main targets of American sanctions is Russian companies operating in the oil and gas sector. For almost three years, Russian oil and gas companies have learned to work in conditions where an arsenal of American sanctions is in force against the Russian Federation (for example, a ban on issuing loans, a ban on access to technology, a ban on any loan transfers or payments between financial institutions, a ban on investing in block of shares, etc.)

Therefore, Russian companies against which the United States has announced sanctions are striving to develop their business within the country, counting on Russia’s reserves and capabilities.

But the owners of one of the giants of the Russian oil industry chose a completely different development strategy - they decided to withdraw their business from Russia as much as possible. Moreover, they should not be taken anywhere, namely to the territory of the United States. We are talking about the LUKOIL company and the project called LUKOIL-America.

Over the years of their business activity, the owners of LUKOIL have acquired unique experience in creating and managing their foreign assets. Mainly, for the purpose of paying taxes in any foreign jurisdiction, just not in Russia. For example, at one time the owners of LUKOIL registered a subsidiary company Lukoil Overseas (LUKOIL Overseas) in one of the most famous offshore zones - in the British Virgin Islands.

To comply with Russian law, the real headquarters of LUKOIL Overseas in Moscow was called a “representative office” (because it was supposedly a foreign company), but in fact managed Lukoil’s oil and gas assets around the world. Then, its activities were curtailed in Moscow and moved to the United Arab Emirates (UAE), where it still operates.

Experts claim that Lukoil, thanks to its cunning ownership structure, annually withdraws billions of dollars to offshore jurisdictions.

But Lukoil went further; in addition to capital, they decided to move their business overseas. Here, it is true that Lukoil’s policy runs counter to its slogan - “a national company.” Having received benefits for many of its sites, the company is in no hurry to make its feasible contribution to the country’s economy, but rather is preparing a new springboard abroad, where it will have to pay taxes in a country that is tightening sanctions against Russia in every possible way. It is known that Lukoil has already received financing in America, through American depositary receipts.

According to sources from the LUKOIL company, a number of managers are ready to move to the USA at any time to join the work of LUKOIL-America. For example, senior vice president of LUKOIL Valery Subbotin, whom the company calls Alekperov’s “right hand”, long ago applied for US citizenship and received a green card, and his family left Russia long ago. And Subbotin himself spends more time in Switzerland, where he manages the activities of the trading company LUKOIL - LITASCO (“LUKOIL-Litasco”).

Some experts believe that by bringing its business under American jurisdiction, LUKOIL will complicate the work of Russian regulatory authorities, in particular the Ministry of Natural Resources. How will ministries and departments regulate the licensing activities of a company if it is under the so-called protection of American justice. What a surprise... instead of following the instructions of the President and the Government of the Russian Federation on deoffshorization and business development in Russia, something dubious is happening and does not fall into the logic of the national company.

Any sane businessman strives to minimize costs, including paying taxes. Unless the question remains open: have the Lukoilites left behind the thin line that separates a businessman’s desire to minimize taxes from direct betrayal of his Motherland?

Why did the vice president of Lukoil for oil supplies and sales, who was vying for Vagit Alekperov’s place, go “to work” abroad?

Litasco is a unique phenomenon for the Russian oil business. It seems that this is the only oil trader of Russian origin that not only sells foreign oil and petroleum products, but also does so in volumes comparable to the supplies of related companies. In December 2016, former Lukoil vice president for oil supplies and sales Valery Subbotin boarded a plane and left Russia. Most likely for a long time. At Lukoil, Subbotin’s departure from the central office was announced only in February 2017 and was explained by a “planned rotation of the management team,” although the company perceived him as one of the successors of President Vagit Alekperov.

In fact, Subbotin was saved. The very next day after the privatization of Bashneft in October 2016, Rosneft quickly took control of the new subsidiary. Familiarization with the documents, more like searches and seizures, a month later led to the termination of part of the contracts with Lukoil - they raised questions, explained Rosneft press secretary Mikhail Leontyev. And a threat looms over Subbotin, two oil traders are sure. It was he who was responsible for trade relations with Bashneft. The main blow was dealt to Subbotin, because even earlier he had disagreements with the head of Rosneft, Igor Sechin, says a participant in the negotiations between Rosneft and Lukoil. It was dangerous to remain in Russia in such a situation.

Mikhail Leontyev

Now Subbotin, according to his friends, visits the USA and Switzerland. It was not possible to contact him. In Geneva, he heads the board of directors of Litasco, Lukoil's own trading company. In 2015, it became the largest buyer of Russian oil according to Forbes. Traders were confident that in 2016 Litasco would definitely lose its position due to friction between Lukoil and Rosneft. But that did not happen. Moreover, Litasco managed to retain the contract for the sale of oil from the fields named after. Trebs and Titov, which is produced by the joint venture of Bashneft and Lukoil.

Intermediary time

“Lukoil didn’t come up with anything new!” - exclaims one of the former leaders of Soyuznefteexport. It was this organization from the system of the USSR Ministry of Foreign Trade, according to Forbes’ interlocutor, that became the prototype of Litasco. Until 1991, Soyuznefteexport was an absolute monopolist in the export of Russian oil and had representative offices all over the world. Despite the annual turnover of 200 million tons of oil, Soyuznefteexport employed several dozen traders and 200 service personnel, says a former employee of the organization.

In 1991, oil producers, refineries and traders received the right to export oil. Licenses were issued so uncontrollably that in the same year the permitted volume of exports exceeded the actually available resources, Minister of Fuel and Energy Vladimir Lopukhin reported to Deputy Prime Minister Yegor Gaidar. “It was such a robbery of the state! Everyone, including the church, received export quotas,” a former Soyuznefteexport employee is indignant. This is not an exaggeration: the financial and economic management of the Moscow Patriarchate was indeed a co-founder of one of the exporters - the International Economic Cooperation company.

The first Russian private trader was Urals Trading, founded by people from Soyuznefteexport. One of the founders of Urals was the Soviet intelligence officer and former employee of the Swedish representative office of Soyuznefteexport Andrei Pannikov. Thanks to his connections, Urals became a prominent player in the market, says a former company employee. For example, Pannikov’s acquaintance and business partner was Vladimir Putin’s friend Gennady Timchenko, who founded the trading company Gunvor in 1997.

Pannikov himself told Forbes that he participated in the creation of Lukoil and allegedly personally worked for the Ministry of Foreign Trade to issue the company an export license. This is not surprising, says Pannikov’s former business partner: the circle of workers in the Soviet oil industry was very narrow, and everyone knew each other well. Urals even allocated premises to Lukoil in the Zvezdnaya Hotel near VDNKh (the company had a Moscow office there); in the early 1990s, Vagit Alekperov, the president of Lukoil and former Deputy Minister of the Oil and Gas Industry of the USSR, used it as an office.

Vagit Alekperov

It was Urals that initially exported significant volumes of Lukoil oil. Other major buyers were Taurus Petroleum and Western Petroleum. They were affiliated with each other, one of the traders told Forbes. Taurus belonged to the American Benjamin Pollner and purchased such significant volumes from Lukoil that market participants suspected him of having connections with the Russian company. According to Businessweek, Pollner was one of the Rich boys - traders from the circle of the legendary Mark Rich, a longtime friend of Soviet foreign trade leaders. In the early 1990s, his Marc Rich + Co (now Glencore) was one of the largest buyers of Russian oil.

“In Russia, God knows what was happening. Everyone was cheating on each other,” recalls the Russian oil trader. By purchasing Russian oil not directly, but through traders, foreign refineries reduced their risks. This suited the oil workers too: traders could provide 90% prepayment. But there was one catch: Western banks were reluctant to finance Russian supplies. The exception was the French BNP Paribas, with which Taurus collaborated. Urals also established contact with the bank’s Geneva branch, says a former employee of the company: the financial director of the oil trader came from Paribas. Urals remained a Lukoil trader for about three years, but Lukoil’s exports were tied to Urals employees for a long time.

Assistants from Urals

A phone call on New Year's Eve 1998 found Oleg Yakovitsky, director of special projects at Lukoil Europe, making pre-holiday preparations. The commanding voice of his boss Valery Golovushkin was heard on the phone: “Get ready urgently, we’re flying to Romania!” “Oh, everything is ashes,” Yakovitsky sighed, packed his suitcase, said goodbye to his family and soon was flying to Bucharest on a Lukoil official plane. There, the oil workers agreed to purchase the Petrotel refinery and immediately flew to the Bulgarian Burgas, where the sale of Neftohim Burgas was being prepared. There were several bidders for the largest oil refinery in the Balkans, but the Bulgarians assured Lukoil representatives that they would get the plant: “Because you have a larger plane than other buyers.”

In the 1990s, their own aircraft worked flawlessly on plant directors, confirms a former Urals employee. The trick with the plane was hardly a secret for the former head of the Danish branch of Urals and a native of Soyuznefteexport Valery Golovushkin. In 1994, he headed Lukoil Europe, the representative office of Lukoil in London. His main goal was to eliminate Western middlemen from exports.

At the turn of the 1990s–2000s, all the world's oil majors acquired specialized trading divisions. Russian oil workers followed their example. Functionally, these were foreign companies on which the margin from the sale of their own oil was deposited, says one of the oil traders: “Strictly speaking, this was a withdrawal of capital.” A simple scheme made it possible to earn an additional $1–2 per barrel, says Forbes’ source. Subsequently, YUKOS was destroyed for such schemes and two of its main shareholders went to jail.

Lukoil went further than its competitors and in 2002 announced the centralization of export supplies at one subsidiary. It was Alekperov’s idea, says a Lukoil employee. And in many ways it was a necessary measure. Western investors criticized Lukoil for selling oil to its offshore subsidiaries at reduced prices. Because of this, the parent company, whose ADRs were traded on the London and Berlin stock exchanges, lost about $1 billion in 2000–2003, complained William Browder, head of the Hermitage Capital fund.

To consolidate exports, the Swiss Lukoil-Geneva was chosen, which in 2000 was renamed Litasco (Lukoil International Trading and Supply Company). Switzerland has very flexible tax legislation, although the country is not formally considered an offshore and is located in the very center of Europe, oil traders explain. The restructuring coincided with the departure of one of its founders and export supervisor Ralif Safin from Lukoil. His place in the status of first vice president of Lukoil was taken by Dmitry Tarasov. He worked at Soyuznefteexport, and in the early 1990s he headed the Finnish division of Urals (Timchenko also worked there). His former Urals colleague Golovushkin, who until the early 2000s was more prominent in Lukoil’s expansion into Eastern Europe, moved from London to Geneva and headed Litasco.

Window to the world

The company’s own trader did not come cheap, says a person close to Lukoil: investments in Litasco’s capital and guarantees to banks amounted to about $7–10 billion. When creating Litasco, the task was set for the ROI ratio (ratio of profit to investment) to reach 15%, but it didn’t work out right away. And it was also not possible to quickly transfer all of Lukoil’s exports to Litasco. In 2005, the trader sold 87% of the oil exported by Lukoil; in 2011, this share remained at approximately the same level. Lukoil now indicates that Litasco carries out all Lukoil supplies outside Russia.

In addition to selling its own products and supplying oil to Lukoil’s foreign refineries, Litasco was faced with the task of selling foreign oil in comparable volumes. In 2004, third parties accounted for 28% of Litasco's trade, in 2008 - 40%, and two years later - 52%. In 2015, the ratio was 51 to 49 in favor of Lukoil. The trader is a “window to the world” for Lukoil, says the Litasco website.

Litasco has significantly increased its trade volumes with third parties thanks to a new strategy that was adopted in 2007, said Lukoil vice-president Valery Subbotin in an interview with Oil of Russia magazine. It consisted of connecting all foreign offices of Lukoil to trade (at that time there were 17 branches and representative offices around the world). “They began to optimize flows, sell when it’s profitable, and use arbitrage,” lists one of the market participants. According to him, due to trading operations, Litasco’s margin could increase by $2.5–3 per barrel.

Valery Subbotin

There is another version. At first, the trader grew due to the huge volumes of Lukoil, for which he did not have to fight. Large volumes made it possible to save on freight and loans, and even then Litasco was able to offer good prices to the market.

A person close to Lukoil attributes Litasco’s successes to a Bulgarian with Iraqi roots, Gati Al-Jeburi. In the early 2000s, he was deputy to two Bulgarian ministers - energy and finance. And then Golovushkin called him to Litasco - financial director. In 2005, Golovushkin was promoted, becoming vice president of Lukoil for supplies and sales, and Al-Dzheburi took the chair of the head of Litasco.

The Bulgarian decided to conquer new markets. In China, Litasco initially had to dump, recalls one of the oil traders: to reduce either its trading profits or the profits of refineries producing fuel oil. All such decisions were approved in Moscow and agreed upon “for a monstrously long time,” says Forbes’ interlocutor: corporate processes within Lukoil resemble a large Russian ministry. Gati Al-Jeburi not only saw new markets, but also managed to break through the Lukoil bureaucracy.

As a result, Litasco's sales increased from 2005 to 2010 by 37%, to 125 million tons, while Lukoil's exports increased by only 6%. In 2015, the trader sold 165 million tons of oil and petroleum products. Litasco's revenue is not disclosed, but from Lukoil's IFRS reporting it can be concluded that in 2015 it was at least $63 billion, and in 2016 - $68 billion.

The role of personality

At the beginning of 2011, a collapse occurred in the Latvian port of Ventspils. The tanks at the Ventbunkers terminal were filled to capacity with fuel oil. Because of this, 1,700 tanks with cargo accumulated at the railway approaches to the port, awaiting unloading. The fuel oil accumulated in the terminal belonged to Litasco, which refused to transfer it to tankers, Ventbunkers reported. Litasco explained that due to the fault of the terminal, the fuel oil had deteriorated and no longer met the requirements of the contract. There could be another reason for the conflict: Ventbunkers was going to replace Litasco with another trader - Mercuria Energy. As a result, it was possible to unblock the port only a few weeks later through the mediation of the Latvian Minister of Transport.

This story is extremely atypical for a trader, assures one of Forbes’ interlocutors: Litasco, like the parent company, is not prone to risks and tries not to get involved in conflicts. In the mid-2000s, within a matter of years, Gunvor became the main trader of Russian oil, and Lukoil accepted the rules of the game, even though they caused inconvenience to its trader. Litasco and Gunvor “didn’t have a lot of customer overlap”; the inconvenience was rather caused by the practice then accepted at the ports: with rising prices, Gunvor tankers were loaded more often, and the loading window for other traders shifted. And vice versa, says Forbes’ interlocutor: “The oil has subsided - Gunvor ships are put at the end of the queue, and the rest are pushed in.”

The owners of Lukoil very clearly understand the boundaries of what is permissible, and this is one of the secrets of their success, Forbes’ interlocutors admit. In 2016, Lukoil was one of the contenders for Bashneft, because these two companies have close ties. Bashneft-Polyus (25% from Lukoil) produces oil at the fields named after. Trebs and Titov (reserves - 140 million tons of oil), and Litasco sells it. In 2015, according to Forbes estimates, the Lukoil trader exported 1.4 million tons of JV oil worth $535 million, in 2016 - almost 2.2 million tons worth $634 million. But events took a different turn: Bashneft got "Rosneft". “We will assume that it is in good hands,” Leonid Fedun, vice president of Lukoil, commented on this deal.

Leonid Fedun

After the purchase of Bashneft, Rosneft began to rebuild its trade policy, and contracts with Lukoil were the first to come under the knife. On November 1, 2016, the contract for the supply of Lukoil oil to the Bashneft refinery and the return supply of Litasco oil products was terminated. They also wanted to review Bashneft-Polyus' oil supplies. But for now, Rosneft cannot refuse the services of Litasco, two oil traders say: the only economically feasible shipping point - the port of Varandey - belongs to Lukoil. Therefore, deliveries to Litasco continue, but since the beginning of the year, prices have been recalculated, says one of Forbes’ interlocutors. He does not name the new price, but notes that it has become more profitable for Rosneft. The price formula has not changed, notes a source close to Lukoil: “What Brent they predicted, that price was included in the contract.” Litasco does not comment on business or trade matters, a spokeswoman said. Lukoil did not respond to Forbes' request. From the commentary of the Rosneft press service, it can be understood that the contract has become more profitable: Rosneft saw an opportunity to optimize product sales channels and, as a result, increase the economic efficiency of sales, and the current agreements are aimed at maximizing profits.

Vagit Alekperov did not dare to openly conflict with Sechin. In general, he rarely interferes with the work of his trading company. An oil trader close to Lukoil recalls such an incident. Due to military operations in northern Iraq, all local oil is being drained into a common pipe. This reduces the quality and, as a consequence, the cost of the raw materials that Litasco exports from the Iraqi West Qurna 2 field. But the purchase prices did not take this into account, and the trader began to lose money. Alekperov had to personally negotiate with the management of the Iraqi state-owned oil company SOMO on a fairer price. As a result, it was reduced by $13. “The role of the individual in history must be respected,” notes an acquaintance of Alekperov. “Trading is relationships and more relationships.”

Sergey Titov

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