How Russia is Nationalized: The Oil Sector

The processes of nationalization in the oil sector are more visible than others and filled with more drama. Still, the state’s desire to capture an ever larger slice of the industy’s income seems logical. But often the methods and appetite of the state companies contradict this logic.
The results of nationalization in the oil sector can be summed up in the following: state shares in the oil industry have become comparable to private shares and Rosneft is its biggest company. The situation is not a joke for the rest of the world and, in our opinion, has not changed the market quality of the industry. It has retained its previous competition among several large, vertically-integrated oil companies and as before has room for structures of a smaller scale. It is difficult to guess the government’s future plans; the signals are too contradictory. The situation in the gas sector looks less optimistic. Gazprom has yet to cope with the tasks given to it, but expansion, in our mind, cannot help but to bring with it managerial problems. There is no other company in the world that owns all of the gas produced in a country and simultaneously was the largest provider of carbon fuels and be among the top five producers of oil and electricity. The growth of Gazprom’s stock, hailed by the company and the government, is not something to be proud of. Currently what the market values most is a growing administrative resource and the willingness to use it unabashedly. It would be nice to see ‘high economic efficiency” added to the list, but that’s doesn’t seem to be in the cards for the time being.

Kommersant