The Rise and Fall of Privatization in the Russian Oil Industry
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The Rise and Fall of Privatization in the Russian Oil Industry Li-Chen Sim FM.qxd 7/29/08 9:41 Page i St Antony’s Series General Editor: Jan Zielonka (2004), Fellow of St Antony’s College, Oxford Recent titles include: Li-Chen Sim THE RISE AND FALL OF PRIVATIZATION IN THE RUSSIAN OIL INDUSTRY Stefania Bernini FAMILY LIFE AND INDIVIDUAL WELFARE IN POSTWAR EUROPE Britain and Italy Compared Tomila V. Lankina, Anneke Hudalla and Helmut Wollman LOCAL GOVERNANCE IN CENTRAL AND EASTERN EUROPE Comparing Performance in the Czech Republic, Hungary, Poland and Russia Cathy Gormley-Heenan POLITICAL LEADERSHIP AND THE NORTHERN IRELAND PEACE PROCESS Role, Capacity and Effect Lori Plotkin Boghardt KUWAIT AMID WAR, PEACE AND REVOLUTION Paul Chaisty LEGISLATIVE POLITICS AND ECONOMIC POWER IN RUSSIA Valpy FitzGerald, Frances Stewart and Rajesh Venugopal (editors) GLOBALIZATION, VIOLENT CONFLICT AND SELF-DETERMINATION Miwao Matsumoto TECHNOLOGY GATEKEEPERS FOR WAR AND PEACE The British Ship Revolution and Japanese Industrialization Håkan Thörn ANTI-APARTHEID AND THE EMERGENCE OF A GLOBAL CIVIL SOCIETY Lotte Hughes MOVING THE MAASAI A Colonial Misadventure Fiona Macaulay GENDER POLITICS IN BRAZIL AND CHILE The Role of Parties in National and Local Policymaking Stephen Whitefield (editor) POLITICAL CULTURE AND POST-COMMUNISM José Esteban Castro WATER, POWER AND CITIZENSHIP Social Struggle in the Basin of Mexico Valpy FitzGerald and Rosemary Thorp (editors) ECONOMIC DOCTRINES IN LATIN AMERICA Origins, Embedding and Evolution FM.qxd 7/29/08 9:41 Page ii Victoria D. Alexander and Marilyn Rueschemeyer ART AND THE STATE The Visual Arts in Comparative Perspective Ailish Johnson EUROPEAN WELFARE STATES AND SUPRANATIONAL GOVERNANCE OF SOCIAL POLICY Archie Brown (editor) THE DEMISE OF MARXISM-LENINISM IN RUSSIA Thomas Boghardt SPIES OF THE KAISER German Covert Operations in Great Britain during the First World War Era Ulf Schmidt JUSTICE AT NUREMBERG Leo Alexander and the Nazi Doctors’ Trial Steve Tsang (editor) PEACE AND SECURITY ACROSS THE TAIWAN STRAIT C. W. Braddick JAPAN AND THE SINO-SOVIET ALLIANCE, 1950–1964 In the Shadow of the Monolith Isao Miyaoka LEGITIMACY IN INTERNATIONAL SOCIETY Japan’s Reaction to Global Wildlife Preservation Neil J. Melvin SOVIET POWER AND THE COUNTRYSIDE Policy Innovation and Institutional Decay Julie M. Newton RUSSIA, FRANCE AND THE IDEA OF EUROPE Juhana Aunesluoma BRITAIN, SWEDEN AND THE COLD WAR, 1945–54 Understanding Neutrality St Antony’s Series Series Standing Order ISBN 0-333-71109-2 (outside North America only) You can receive future titles in this series as they are published by placing a standing order. Please contact your bookseller or, in case of difficulty, write to us at the address below with your name and address, the title of the series and the ISBN quoted above. Customer Services Department, Macmillan Distribution Ltd, Houndmills, Basingstoke, Hampshire RG21 6XS, England FM.qxd 7/29/08 9:41 Page iii The Rise and Fall of Privatization in the Russian Oil Industry Li-Chen Sim Assistant Professor, Zayed University, United Arab Emirates In Association with St Antony’s College, Oxford FM.qxd 7/29/08 9:41 Page iv © Li-Chen Sim 2008 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No portion of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, Saffron House, 6-10 Kirby Street, London EC1N 8TS. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The author has asserted her right to be identified as the author of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2008 by PALGRAVE MACMILLAN Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, registered in England, company number 785998, of Houndmills, Basingstoke, Hampshire RG21 6XS. Palgrave Macmillan in the US is a division of St Martin’s Press LLC, 175 Fifth Avenue, New York, NY 10010. Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world. Palgrave® and Macmillan® are registered trademarks in the United States, the United Kingdom, Europe and other countries. ISBN-13: 978-0-230-20298-6 hardback ISBN-10: 0-230-20298-5 hardback This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. Logging, pulping and manufacturing processes are expected to conform to the environmental regulations of the country of origin. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data Sim, Li-Chen, 1972- The rise and fall of privatization in the Russian oil industry / Li-Chen Sim. p. cm. — (St Antony’s series) Includes bibliographical references and index. ISBN-10: 0-230-20298-5 (alk. paper) ISBN-13: 978-0-230-20298-6 (alk. paper) 1. Petroleum industry and trade—Russia (Federation) 2. Privatization—Russia (Federation) 3. Industrial policy—Russia (Federation) I. Title. HD9575.R82S458 2008 338.2'7280947—dc22 2008016422 10 9 8 7 6 5 4 3 2 1 17 16 15 14 13 12 11 10 09 08 Printed and bound in Great Britain by CPI Antony Rowe, Chippenham and Eastbourne FM.qxd 7/29/08 9:41 Page v For my parents, Mike and Anne This page intentionally left blank FM.qxd 7/29/08 9:41 Page vii Contents Acknowledgements viii Notes on Transliteration and Translation ix List of Abbreviations x List of Principal Political and Economic Actors in the Book xi 1 Introduction to the Policymaking Process 1 2 The Initiation and Spread of Privatization 16 3 Case Study of YUKOS 49 4 Case Study of Slavneft’ 76 5 Case Study of Rosneft’ 99 6 Conclusion 119 Appendix 1 131 Appendix 2 132 Notes 133 Bibliography 183 Index 209 vii FM.qxd 7/29/08 9:41 Page viii Acknowledgements When I first embarked on my research, I had little idea of what I was letting myself in for – the mountains of material to sieve through, the periods of self-doubt, the stages of writer’s block. The fact that this book has seen the light of day is a testament to people who have helped me along the way, and to whom I owe a great debt of gratitude. My thanks go out to my mentor, Prof. Archie Brown, for his unflag- ging optimism that the project would one day be published. By playing the devil’s advocate – which sometimes kept me up at night thinking of a suitable rebuttal – he forced me to examine, refine and strengthen my arguments and to see the merits of alternative perspectives. His gen- erosity with his time and advice as well as his personal kindness are much appreciated. Dr Paul Chaisty and Prof. Thane Gustafson, who read an earlier draft of the manuscript, kindly shared with me invalu- able suggestions on getting my work ready for publication. However, none of them bear any responsibility for errors of fact or judgement. Research for this book was conducted over a number of years in both the United Kingdom and Russia. I am greatly indebted to persons I have interviewed in the course of my research. They were without exception generous of their time, forthcoming with information and did not shy away from dealing with sensitive and awkward issues concerning oil privatization, even when some interviews were conducted in the midst of the YUKOS affair. It was certainly a real privilege for me to engage with participants who have directly influenced the policy process in Russia. I would also like to acknowledge the generosity of organizations such as the Oxford Institute of Energy, the Bodleian Library (University of Oxford), the Russian & East European Studies Centre at St Antony’s College (University of Oxford) and the Kommersant’ group (Moscow), which made available their holdings on the topic; and consultancy firms such as Troika Dialog, Renaissance Capital and Aton, which did not hesitate to share their well-researched reports on the Russian oil industry. Most important of all, I wish to thank my parents, Mike and Anne, to whom this book is dedicated, for their unstinting and constant support in everything that I do; and my husband, Frank, for his love, encour- agement, humour (when it was most needed) and patience. viii FM.qxd 7/29/08 9:41 Page ix Notes on Transliteration and Translation This book uses the transliteration system adopted in The Cambridge Encyclopedia of Russia and the Former Soviet Union and Post-Soviet Affairs whereby: e ϭ e (except at the beginning of a word or name, such as Yevgeniy) Й ϭ y ы ϭ y ь ϭ ’ ю ϭ yu я ϭ ya When referring in the text to a work published in English by a Russian author, the name will be transliterated according to the above system (for example, Yuliya Latynina, Yegor Gaydar). However, in the footnotes and bibliography, the name will be cited as it appears in the original language of the source (for instance, Julia Latynina, Yegor Gaidar). An exception is made if the subject is well known in the English-speaking world and uses a modified transliteration of the name. Hence, the book refers to LUKoil and not LUKoyl, and to Rair Simonyan not Rayr Simonyan. All translations from Russian sources are by the author, except where otherwise indicated. ix FM.qxd 7/29/08 9:41 Page x Abbreviations GKI Gosudarstvennyy Komitet Imushchestva State Committee for the Management of State Property;