Nationalization of the oil industry: a magic wand or a "breakthrough" into the past?

Nationalization of the oil industry: a magic wand or a "breakthrough" into the past?

Nationalization of the oil industry: a magic wand or a "breakthrough" into the past?
Analytics

21 January, 16:02
Photo: https://investments.academic.ru/
Novye Izvestia opens a series of materials in which, together with experts, they are trying to figure out what is better for the survival and efficiency of state-owned enterprises - to get into private hands or remain under the wing of the state. The first piece is about the oil and gas sector.

Victoria Petrova

At the end of last year at the State Council, Vladimir Putin issued a meaningful phrase that privatization "should be carried out only where it brings results, it is not done for money - where necessary, we retain state control". The Ministry of Finance has much more specific plans: in 2021, more than 300 state-owned enterprises should be auctioned off. Rostelecom, Rosseti, Makhachkala and Novorossiysk ports must find new investors. From the point of view of the Ministry of Finance, the move is logical - privatization should bring the budget 3.5 billion rubles annually. And from the point of view of Gennady Zyuganov, the sale of property that ensures stability is simply a crime. The issue is historically painful, there is no consensus on privatization.

And the situation with the participation of the state in the economy is extremely complicated. On the one hand, its share is constantly growing and increasing. Even Sberbank, which had lived in an incomprehensible status for many years, became state-owned in 2020 without any questions.

The numbers are unforgiving: the state is everywhere. Last year, the coronavirus disrupted all plans, and no one began to count the exact share of the state economy. But in 2019, the Accounts Chamber argued that over the past 10 years, the share of the public sector in the economy has grown by 10 percentage points. up to 47% -48%. The FAS even estimated the growth of this share from 25% in 1998 to 60% -70% by 2017 (in 2018 the situation did not change dramatically) and warned that the strengthening of the public sector is the main threat to the normal development of the economy. So what to do, give everything to private owners?

Oil and gas: the main pillar and threat

Nothing ensures the stability of the state (and does not destabilize in an unfavorable environment) like the oil and gas sector. Let's talk about this industry first. Last year, oil and gas revenues provided a record low 30% of the federal budget, but only due to the commodity and coronavirus crisis. However, there is also a tax on the profits of oil and gas companies, a tax on salaries of oil workers, and excise taxes that go to regional and local budgets. Oil and gas means power, money and people's well-being, therefore the privatization of oil and gas enterprises is the most painful issue.

Nikolay Krutikhin , oil and gas industry analyst:

- The experience of the oil industry over the past year shows that there were many slogans of “privatization” to increase efficiency. But the opposite happened. If in 1997 7% of oil was produced by the state, now more than 63%. That is, this is not privatization, but "creeping" deprivatization.

So maybe you shouldn't act out a play, but just take and nationalize everything? Very much in the spirit of recent times - state regulation of prices, attempts to revive the state plan... In fact, in oil and gas we have only two truly private production companies, without any reservations, which occupy a significant position in the market. These are Lukoil and NOVATEK.

Unfortunately, there are no other significant examples of private companies in the oil and gas sector in Russia. Surgutneftegaz, famous for its $ 46 billion "money box"? But the true beneficiary of the company is unknown, and there are suspicions that it is connected with the power structures. Putting everything that you have earned in inventory for a rainy day is completely atypical for a private company. Irkutsk Oil Company (INK)? But it produced only 9 million tons of hydrocarbons in 2019 - not at all the scale of the state leaders in the industry. Mikhail Gutseriev's Russneft, famous for its oil supplies to Belarus? But in 2020 it produced only 6.5 million tons of hydrocarbons, and last year it was on the verge of bankruptcy due to the inability to repay debts on time. Slavneft and, for example, Salem Petroleum also appeared for a reason. The first company is a joint venture between Rosneft and Gazpromneft, the second is a joint production of Shell and Gazprom Neft.

It turns out that in the field of production, state-owned companies have practically no competitors. Only the percentage of shares owned by the state and state-owned companies varies.

Take away and... not divide

The main supporters of nationalization in Russia, not surprisingly, are representatives of the Communist Party of the Russian Federation. The nationalization of the oil and gas industries even became one of the points of their election program "Ten Steps to a Decent Life", adopted in 2016.

This is how Yuri Afonin, First Deputy Chairman of the State Duma Committee on Natural Resources, Property and Land Relations, a member of the Communist Party faction, describes the horrors of the national characteristics of private business in Russia.

- We must clearly understand that many enterprises that were given away for a penny brought a profit of thousands of percent to new owners. At the same time, the private traders themselves simply squeeze everything out of the Soviet-era infrastructure they inherited. They do not modernize it, do not put it in order, do not install treatment facilities and filters, but simply select all the power until a breakdown simply occurs due to the old equipment, wear of materials. A striking example is the Taimyr disaster. How old was Norilsk Nickel's diesel tank? Why was it not maintained in proper condition? As a result, colossal damage has been caused to nature. How many more stories like this can happen?

The ideas of the communists find their response in the expert community. Oil and gas is a strategically important industry on which almost everything depends. We have no other suppliers of oil and gas, except for our own, 80% of the fuel is sold to the largest vertically integrated oil companies (VICs), and there is no need to talk about filling the budget.

Now let's imagine what will happen if Rosneft with its Bashneft, Tatneft, Gazprom and its entire infrastructure are taken over by private investors who have nothing to do with the current operating schemes and pumping out subsidies from the state. Obviously, the new management will tackle cost cutting. They are in oil and gas, which carries with it the Soviet legacy and at the same time carries social functions (it sounds strange against the background of higher tariffs for fuel with energy carriers and slow gasification of regions, but it also happens), at every corner. This is how our experts assess such prospects.

Sergey Pikin, Director of the Energy Development Fund:

- When a company is state-owned, it partially performs some socially significant tasks and projects. Gazprom has gasification as a social project. It does not yet bring that increase in gas consumption that would pay off the company's contribution to its commissioning. The company annually spends about 30 billion rubles for these purposes a year, by the end of 2030 they will spend about 1.9 trillion rubles more. This is a social project that private business will not undertake.

Yuri Afonin:

Photo:https://dprom.online/

- In fact, there is not a single example when in the 90s someone got a state plant, and he effectively used and developed it. Of course, as liberals like to say, private firms are more efficient. If you do not spend, but only squeeze everything out of the company, it will naturally be more profitable. But this is a road to nowhere.

However, the idea of nationalizing oil and gas companies is not only a relic of the Soviet past. Now the oil industry is state-owned in Norway and Saudi Arabia (the year before last, a part of Saudi Aramco was put up for IPO, but it was a small share). And these countries live well. Norway has the world's largest sovereign wealth fund (accumulated more than $ 1 trillion since 1996), formed by oil and gas revenues, which made it possible to survive the crisis of 2014 relatively calmly and guarantees a fairly high standard of living for all citizens. In Saudi Arabia, until last May, there were no problems with social security: citizens were paid a living wage of $ 380, civil servants and the military received a supplement of $ 266, the authorities compensated for some of the electricity costs, and the VAT was just ridiculous - 5%. The 2020 crisis, of course, crippled the finances of the Saudis, but they have almost nothing but oil.

In addition, in the modern world there is an experience of nationalization: in 2012, the Argentine parliament passed a law on the expropriation of 51% of the shares of the oil company Yacimientos Petroliferos Fiscales (YPF), which belonged to the Spanish Repsol. But there are nuances: the Spaniards were offended by the seizure of assets, demanded compensation for their losses of $ 10.5 billion (about 780 billion rubles at the current exchange rate), refused to purchase Argentine biofuel and complained to the EU. The conflict that spoiled the investment attractiveness of Argentina (no one wants to just lose their assets) was settled only in 2014 after promising to pay Repsol at least $ 5 billion.

Nationalization could remove the issues of attracting investments (no investment - no problems), finally would relieve the management of companies from the desire to make money, which would allow introducing state regulation of fuel prices (who does not dream of gasoline for 20 rubles) and certainly protect themselves from Western influence (enemies are everywhere!).

And according to Yuri Afonin, private traders can only handle well the business that they have created themselves from scratch, which is their offspring, and only the state can keep the old enterprises that came from the Soviet Union afloat with care for the environment.

- If a private trader builds his production from scratch, then usually he takes excellent care of him and pays all taxes, attracts investments. Only the state has the funds to support the factories inherited during the privatization of the 90s, to ensure their uninterrupted operation even during a crisis. We can argue a lot about the salaries of Gazprom employees, but in the end they still go to the budget, and then to the regions.

With the advantages of nationalization, everything is more or less clear. But, as we understand, there is another side of the coin. We will talk about it in the second part of the article. The option of privatization has not yet been canceled, as evidenced by the same plans of the Ministry of Finance, which is not yet going to give up private property, tie red ties to everyone and move into a bright future in formation. And redistribution of assets is always fun. Read about this in the near future in the new material of Novye Izvestia.

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