Russian Oil Dispute Russia's Pipeline Czar is Putin's 'Soldier'

Semyon Vainshtok, the clever and self-confident head of the pipeline group Transneft, manages Russia's giant oil distribution network. By shutting off oil supplies to the West, he has provoked a serious foreign policy crisis.

By André Ballin in Moscow


Transneft President Semyon Vainshtok describes himself as Putin's "soldier."
REUTERS

Transneft President Semyon Vainshtok describes himself as Putin's "soldier."

As soon as the energy dispute between Russia and Belarus erupted, Semyon Vainshtok, president head of Russian pipeline company Transneft, was in the thick of it, hurling heated rhetoric at the Belarus government. Minsk had attacked a sacred cow by siphoning off oil supplies from the Druzhba ("Friendship") pipeline, he complained. Transneft's retaliation, shutting off all oil supplies, was a perfectly natural response for Vainshtok.

Vainshtok has managed the state-owned pipeline monopoly since 1999. The row with Belarus over the Druzhba pipeline is his biggest challenge so far. If he makes a false move, it could cost him his job.

Unlike Gazprom CEO Alexei Miller, Vainshtok isn't regarded as a close confidante of Russian President Vladimir Putin; he took up his position as head of Transneft under Putin's predecessor Boris Yeltsin. The intelligence agency faction within the Kremlin would prefer to get rid of him and install their own man.

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But Vainshtok is agile. He has learned how to get his own way and has no lack of self-confidence. "In my entire career, which now spans more than 40 years, none of my projects has failed," he once told a radio interviewer.

Semyon Mikhailovich Vainshtok was born in 1947 in the village of Klimauzy in Moldova. After studying at a technical college and an institute of building engineering, he continued his training at the University for the Gas and Oil Industry in the Siberian city of Tyumen.

He remained loyal to the industry, working at the Bashkirian oil company Bashneft before moving to the Russian oil company Lukoil, where he rose to become vice president. In the 1990s he even took a course at the German Management Academy.

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Vainshtok's promotion to president of Transneft in 1999 provoked a scandal. His predecessor was unwilling to give up his position and took legal action. As a result, a court suspended Vainshtok's management powers for two months. In the end, Vainshtok got his own way, however. Rumor has it that he was a protégé of the late railways minister Nikolai Axjonenko and of oil billionaire Roman Abramovich, now the owner of London's Chelsea Football Club.

Vainshtok's new position made him one of Russia's most powerful men. Transneft controls the world's largest pipeline system with a total length of around 50,000 kilometers. All major oil companies have to negotiate with Transneft if they want to export their product.

A plan by the Yukos group to lay its own pipeline to China ended in conflict and was probably one of the reasons for the subsequent fall of Yukos head Mikhail Khodorkovsky.

West 'overfed with oil'

But Vainshtok welcomed the idea to boost oil exports to the East -- if need be, at the cost of supplies to the West. It fits in with his corporate strategy. "We have overfed the West with oil," the pipeline boss said last year. "Every economic textbook will tell you that the price falls if there is an over-supply. As soon as we turn to China, South Korea, Australia and Japan, this will take part of the oil away from our European partners."

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Transneft forged ahead with its plan to build its own pipeline to China. Environmental concerns were secondary, and the plans approved by Vainshtok even envisaged running a pipeline along the shores of Lake Baikal. The Transneft boss did all he could to silence protesting ecologists, and environmental reports were changed to secure construction permits. Demonstrations in front of the Transneft headquarters were quickly dispersed, and protestors arrested to prevent unwelcome publicity.

In the end it didn't work. President Putin himself at the last moment surprisingly ordered a change in the pipeline route to avoid Lake Baikal, a sacred place for many Russians. "I'm a soldier, the president is commander-in-chief," said Vainshtok, always keen to stress his loyalty to Putin. "Orders aren't questioned."

In the conflict with Minsk, too, the commander-in-chief will eventually intervene and hand down his orders. At the moment it doesn't look as though Putin will back down in the spat with Belarusian President Alexander Lukashenko. Whatever happens, his loyal soldier will carry on the fight.

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