Interviews and speeches

In the last years many a lance have been broken over the argument as to whether Russia appears to be a modern industrial power or having got addicted to the crude oil drug it just lives in a dangerous state of euphoria over easily earned money granted by mother-nature. There is a lot of talk about a raw materials pit in which the country that avoids investing ample means into the development of high technologies and promising scientific projects has fallen to. There are many of those who are prophesying with Cassandra-like ecstasy the forthcoming decline of Russia’s industry doomed to linger in the rears of the world’s global economy. Most of the polemists being distant from the plough, lathe and oil-rig fail to notice the progress that is taking place in many sectors of the domestic economy. Alas, such positive development won’t suit them as it gives no cause for twisting one’s hands and wailing over misgivings.
All these lamentations are no more than slyness as they do not reflect the actual state of affairs. After the difficult years of decline and depression the country is returning to life which is a slow but steady process. Omissions in basic branches of the economy are being repaired, new optimal ways of capital investment are being found. In Russia has appeared a powerful Pleiad of nationally oriented businessmen who follow the best traditions of domestic enterprising. They won’t take away their money abroad to the care of Swiss gnomes, neither do they buy squadrons of yachts or overseas football teams. They prefer to plough their own cornfield regarding it as a patriotic, civil and human imperative. And it is not just idle talking as is backed up by what they really do.
And all the discussions as to whether Russia is an industrial or raw materials country are no more than pure chattering. Russia’s research-and-production potential allows coping with the most complicated tasks of the national economy. Of course, negative consequences of the unwise reforming tell on a number of the national economy trades. However there is no way to bring all the branches of production to a proper level at one go. Vast sums of money are required for that. And it’s just the vast sums of money that big Russian companies such as Russneft Holding earn for this country.  The Holding founded by Mikhail Gutseriev two years and a half ago has become one of the ten leading oil and gas companies of Russia within such a short period of time. Currently the Company’s monthly production volume exceeds 1.2 million tons of crude oil. But the busiest time is still ahead as the proved reserves of “black gold” amount to 600 million tons.
It’s worth mentioning that as a rule Russneft acquires its assets from secondary markets which means that the Company buys assets of those enterprises which are thought of as no-promising and not wanted by other companies. However Mikhail Gutseriev has his own vision of what is promising and what is not. And it is nothing else but professional insight and exact reckoning which have never let him down. There are many examples to that. A remote Siberian oil field had no extraction infrastructure, after such infrastructure was set up the extraction started. For many years desolate oil wells stayed idle. With certain funds invested and refreshment done they began to yield crude oil.
Some time ago the Bryansk Oblast found a new investor represented by Russneft which has become the biggest investor in the history of the region. In June the Company completed one of the most ambitious projects in oil industry by setting up and initiating a high-capacity oil loading terminal. Just a year ago the area in a far-away place of the Starodubsky district of Bryanschina was just a swamp overgrown with sedge. And nearby there were deserted fields for many years neglected by the farmer. The construction of the terminal animated the life of the area and the entire Oblast. In many respects the residents of the Bryansk Oblast benefited from the geographical position of the place because not far from it there was Russia’s western border, a branch railway and the main oil-pipeline. If it had been a finished industrial project, a refinery for instance, oligarchs would have unleashed a war having attracted influential lobbyists. However there was no interest in this remote place in the Bryansk Oblast as there seemed to be no promise in the marshland and deserted fields.
Mikhail Gutseriev and his team started from nothing. They laid roads, underground and on-land communications, restored railway junctions. In short they developed the new territory in all directions observing all the essential ecological requirements. By the way when installing waste disposal facilities they applied the latest engineering technologies using microelements. In the lake where treated water from these facilities is let out they began to breed carp-fish as was proposed by Mikhail Gutseriev. 
Within only ten months the oil-loading pipe rack was constructed. It has become a first-rate industrial project with a capacity of five million tons a year. Russneft Holding has invested more that 90 million dollars into the economy of the region, creating hundreds of jobs. The above-said is to be confronted with the opinion of some analysts stating that Russia’s business has become less active waiting for new opportunities. The example of Mikhail Gutseriev and his associates proves the reverse. The money of the Company is used in a real sector of the economy. Russneft’s investment stake amounts to 240 million dollars this year. This money is being invested into the economy of Russia’s regions. And as a matter of fact these are components of the Gross Domestic Product growth which is to be doubled by 2010 as posed by Vladimir Putin.
It is practically impossible to find Russneft President in his Moscow office as he is ever traveling. Therefore taking the chance of his short stay in Moscow I asked to interview him for our paper. The first question is not about crude oil and his business but about the flown mileage.
- Your passion for traveling exclusively by air is often associated with the fact that you were born on the same day as Gagarin.
- Yury Alexeevich flied to the space when I was three years old. At that time I had a vague notion of what a space rocket was like. In my family everybody really worshiped the first cosmonaut of the Earth. At that time we lived very poorly and his flight inspired hopes for a better life. This inspiration has stayed with me for good and all. As for the airplane and the wings it is not a luxury but a modern means of transportation. Long time ago the automobile caused the same feeling. In my business there is little of the automobile. I do not tackle business issues in my Moscow offices. In our business it is not possible to do without the air carrier.
- You started Russneft working in two regions. Now there are ten of them, from Krasnoyarsk to Bryansk  and also Byelorussia. And you prefer to be present personally everywhere. Why? Don’t you trust people?
- Just the other way about. I do trust, but people begin to better understand the general task and to work better when I find time to talk to them at their working places. As you know the life of the oilman is no lump of sugar.
    The Company was created two years and a half ago. Now it is a huge holding tied up not only to the interests of entire regions but also to the fates of very many concrete people. I am talking not only about the workers, engineers and office employees of Russneft, but also about the residents of those areas and districts in which we produce and process our crude oil. Jobs, budget assessments, social projects are clue vectors of modern market economy. And how can one tackle all this and get it going sitting in a Moscow office?
- Has it ever occurred to you that having set in motion the life of many regions Russneft has become not merely an integral composite but also national-wide project of those regions?
- When I fly from one region to another, I meet ordinary people and managers, conclude contracts. Doing so I definitely feel that Russneft is sewing together different regions with one thread. As for the national-wide project, whatever I have been doing in business the question or rather the answer for whom I serve and for whose sake I work has been the foremost to me. And isn’t a person opening a barber’s shop and thus embarking on a path of small business both an author and executor of the national project? Is geographical scale of any importance? Small and medium scale business is a basis of the budget and economy, and the most important thing is the well-being of all advanced countries.
Therefore the national project that serves the society without cleaning out the state, will neither grease on the budget nor exist on the money of tax-payers.  
- More than once you have mentioned that business and politics are two different things and that the first one must above all serve the society and the people. And if someone wants to go into politics let one do so.
- And haven’t the last years proved my reasoning to be true? I have also said that I am ready to give to the state as much as is needed so that it wouldn’t prevent me from doing my favorite work.
- And still how many kilometers have you flown this year?
- Let pilots keep count of kilometers, and I will tell you about new assets. The family of Russneft has replenished with daughters in Idmurtiya, Tyumen, Samara, Penza, Tomsk and Ulyanovsk regions. This is the main outcome of my trips.
Russneft has concluded an agreement with the administration of the Ulyanovsk region. The agreement has been signed by the Governor Sergey Morozov. The document specifies priority lines in the interaction of the Parties aimed at stable development of the economics of the region, improvement of the investment climate and creation of favorable conditions for tackling social problems of the region. The terms of the agreement stipulate joint actions of the Parties in resources development, environmental protection, and improvement of research-and-production potential of the area.
By the example of the Ulyanovsk Oblast we are developing some sort of a basic model of the participation of the Company in the development of an individual region. Currently we work in six areas of the Ulyanovsk Oblast which are Nikolaevsky, Novospassky, Melekessky, Cherdaklinsky, Novomalyklinsky and Radischevsky districts.
Among the Company’s enterprises in Ulyanovsk there are Ulyanovskneft OAO, SP Naftaulyanovsk ZAO, Nefterazvedka OAO. Their production volume in 2004 exceeded 600 thousand tons of crude oil. The production volume of Ulyanovsk enterprises will be raised to 800 thousand tons in 2005, and to 1.1 million tons in 2006.
Russneft is successfully implementing 2004-2006 investment programs and its five-year plan of geological exploration. The main emphasis in the Ulyanovsk region is placed on integrated development of Cherdaklynsky area and implementation of the first-stage exploration in the area of Novospassky and Radischevsky districts. In December 2004 a 14-kilometer pipeline named Novospasskoye-Klin was laid and commissioned. Thus the Company made its first step on the way of establishing a modern production infrastructure at the oil fields of this region.
We also take an active part in social programs of the Ulyanovsk region. This activity includes construction of Spaso-Preobrazhensky Temple and a mosque, renewal of some infant schools, gasification of the village of Vishenky, construction of a boiler-house for a kindergarten in the small town of Dyvny of the Melekessky district, a mini-boiler-house in Novomalykla, sponsorship of a football team called Neftyanik in the small town of Novospasskoye.
Russneft renders significant financial support arranging summer holidays for children of the soldiers killed in Chechnya. Cultural institutions have also received financial support from the Company; specifically it is the regional drama theater as well as some other social sphere services of the area.
We use the same pattern of cooperation in other regions as well.
- Your Company works in ten regions of Russia and in Byelorussia as well. Out of these regions the Samara region and the Republic of Komi are included in the number of donor regions. It turns out that your presence in the eight other regions is a most favorable factor as it means new jobs, budget assignments and social programs. Don’t bureaucrats pester you in these regions?
- I shall not say anything new. Yes, the administrative resource is difficult for any business. A corrupted country with administrative capital has no future.
Vectors of social responsibility and political efficiency must be aimed to at the same point. And if they do coincide, future seems to me more or less promising.  It’s just the policy we follow when we begin to work in various regions.
Moreover, Russia’s independence can only be based on its national capital. This capital should not be inferior to the foreign one. And it is the capital that we forge in the regions.
- Does everything go off smoothly, without a hitch?
- It depends. However any conflicts can be settled if one wishes.
In our affiliate Beliye Nochi a collective agreement has been signed. It was quite an event as before Beliye Nochi became a part of Russneft all the attempts to do so had been in vain. In 2001 the collective agreement conference grew into a conflict. A reconciliation committee had to be urgently set up. However the committee proved helpless in solving the issues.
Now that stability settled in the company there was a possibility to come to an agreement and specify mutual liabilities of the management and the staff in a respective document.
It took several months to develop a draft of the collective agreement. A document that had been operative in the company up to 1999 was taken as a basis. Special attention was given to the sections dealing with social guarantees and compensations. And it was quite natural because the sensational cash law caused quite a stir among oilmen. According to this law the northern pay allowances and compensations were to be paid to those who work in budgetary organizations. As for private companies all the payments to the employees were to be set by their owners.
Presently the employees of Beliye Nochi have no cause for alarm as all the guarantees with regard to the northern coefficients and pay allowances upon salary accounting including the right to a prolonged leave are stipulated in the documents of the company.
It is important to note that the employees of the company are granted a free travel to their leave site once in two years. This privilege applies to their families as well.  
It has become a tradition of the company to financially support employees in narrow circumstances. In the accepted document there is also a provision specifying financial assistance upon marriage, child birth, act of God, death of a close relative and so on.
 - And what about incentives for effective work?
- Basic parts of the collective agreement were drawn up within the framework of the social package providing for material incentives for the employees. The size of the bonus may reach 60 percent (when the extraction plan has been surpassed and technical and organizational actions have proved a success).     Provisions have been made for half-year bonuses and lump sums provided plans are fulfilled and financing activities are successful.
- And how do regional authorities react upon such agreements?
- By way of reply I would like to give you a most remarkable example. Upon signing our agreement the Governor of the Tomsk region Victor Kress said to the newsmen: “More good and different businessmen over the territory of the region! We are beginning to implement this thesis fully backed by the population”. He further stated that the big Company that had become active in the region was one of the ten leading oil business-structures of Russia. The authorities must be able to cooperate with big employers, the Earth users and those creating vacancies and paying taxes to all-level budgets.
-  Do you keep to the beaten tracks or pave your own ways?
- Russneft is setting up a big oil-producing station in the Tomsk region. In the nearest future the Company is going to do some geological exploration over the territory of the region, construct field facilities at new oil sites,  create own management structure. There is a plan to invest 1 billion rubles into the local economy in 2005. We are interested not only in the development of the enterprises already acquired. We are also attracted by the reserves over the right bank of the Ob River. Half of the planned investments are intended for geological exploration in this very area. We hope to be able to discover big crude in here. Presently we are looking for the right personnel, getting to know local leaders. Russneft has come to this area for long. And we do the same in all the regions in which the Company invests its money.  Our charitable programs are kept in proportion with our crude volumes in a certain region.
- Is there anything new in your social programs?
- Could you tell me what young people need in order to work well? It’s a good salary and higher living standard, isn’t it? But this is by not means all they require. Bitter experience of our pensioners, abandoned by the state is a warning to the young. The state helps those who help themselves.  Therefore we offer a social program called “Save up your own pension”.
 - What is the gist of it?
- It is all very simple. Russneft’s management and a no-public pension fund called Vernost (NPF) have agreed to implement a social program of additional pension provision for Russneft employees beginning from 2005.
Save Up Your Own Pension Program provides for establishing a corporate pension system and ensuring effective activity of the Fund.
The main idea of this social program is simple. Upon retiring all the employees of Russneft must get the state labor pension, additional corporate pension from a branch for which they have worked and additional free-will pension saved up from their own funds.
Each employee may get any clarification concerning the corporate pension system and the no-public pension fund called Vernost locally where he works.
- How does it go in your life, do you live as you plan or as it turns out?
- It is a question for the youth. But I will reply. What I want and what I can are two different things. I respect those who live as they like. They are people of great vitality. Especially those who started their business from nothing without having made use of some budget means allowing to get hold of enormous assets.
- Do you have any complaints about our financial system?
- It is not a matter of complaints. As for me I have a bad old car. It won’t get started easily and keeps breaking down all the time. By and large everything comes to one thing, namely, a strong financial system is an important prerequisite for the development of the national capital. So far this system has not got to its feet but it persists in learning to walk.
- Is Russneft going to do initial public offering at respectable stock exchanges? When will the time come?
- I assume that it will soon happen. As soon as we pass the maturity line.
- Oil prices keep jumping. Who is to blame, the government or the oil men?
 - Both. The government is tight with taxes and duties. The business raises interior prices. But the world’s prices also rise. It is just the question that requires team-work.
- They say that Russneft will have its own petrol stations in Moscow. Won’t the prices be pleasing either?
- We are a part of the market and the state system. Therefore this and other issues must be tackled by all together.
- Do you believe that your efforts in the business and the objectives of the government will coincide and our life will improve?
- I believe in that and am doing everything that our realities require. 
Interviewed by
Yuri Koveshnikov

From our file
No-Public Pension Fund Vernost was established in 1996. It has a license to act as a no-public pension fund numbered 79 dated 28th of March 1996 issued by RF Labor and Social Development Ministry without limitation of its validity. The Fund also has a license on pensions provision and insurance numbered 79/2 dated 16th of April 2004 issued by  RF Labor and Social Development Ministry without limitation of its validity.
NPF Vernost is a member of Russia’s National Association of No-Public Pension Funds.
Founders of NPF Vernost are NK Russneft OAO, BIN Bank (OAO), ST Goloil ZAO, Varieganneft OOO, Beliye Nochi OOO, Ulyanovskneft OAO, SP Naftaulyanovsk ZAO, Uralskaya Neft OAO, Belkamneft OAO.
Vernost’s pensions reserves are under the asset control of NVK Managing Company OOO.
In 2004 international rating agency Expert RA placed Vernost among the 50 most reliable NPFs registered in Russia.