Filenews 9 May 2022
By Giacomo Tognini
For the Russian media it is "Darth Vader". American diplomats in Moscow call him "the gray cardinal of the Kremlin", because of the influence he exerts behind the scenes. The reason for Igor Schechin, the 61-year-old CEO of state oil giant Rosneft, who has long been considered no2 in Moscow, after Putin.
Schechin's unwavering faith in the Russian president for two decades has made him rich. How rich is he? Hard to calculate, since Schechin's fortune is almost as opaque as Putin's: none... paper in addition to its shares in listed Rosneft. However, based on state documents, Russian media reports and the value of his yachts – according to VesselsValue – Forbes estimates that Schechin is worth at least 800 million dollars. Or at least, that's how much it was thought he was worth, until he was sanctioned by the European Union on 28 February.
Schechin's most important assets are two of the most expensive yachts in the world: the Crescent – 136 metres long and worth $511 million which has two heliports, a cinema, a beauty salon and a swimming pool, and the Amore Vero – 86 metres long and worth USD 134 million (his first name was "Princess Olga" from Igor's second wife, Olga Schechina, until 2017 when the couple divorced), which has a swimming pool that turns into a helipad. Both vessels were seized in March: the Crescent in Spain and the Amore Vero in France. It is not clear whether the Crescent is in Schechin's name or appears to belong to one of his associates, however according to VesselsValue the Russian oligarch is the real owner of the yacht. A Spanish police source cited by Reuters and a source from the yacht industry who spoke to Forbes converge on this view.
Schechin and his children, Ivan (who was sanctioned by the US on February 24), Inga and Barbara, are also alleged to be property owners in Moscow's aristocratic suburb of Rublevka. According to an article in the Russian newspaper Vedomosti, in 2014 he began to build a residence in Rublevka on an area of more than 7 acres, while the following year his children bought 8 acres of land next to the Schechin plot. The price for the purchase of these properties amounted to 110 million dollars, according to Vedomosti, against whom Schechin filed a lawsuit for invasion of his privacy because of a publication detailing the markets in question. A Russian court ordered the newspaper to remove the controversial article four months later. Today the value of the land belonging to the Schechins is valued at close to 100 million dollars, due to the exchange rate of the U.S. currency with the rouble that has receded. Igor has less than 1% at Rosneft, worth about $77 million.
Schechin himself did not want to comment on Vedomosti's publication. To the questions sent to him about his fortune and his rise to power, Rosneft responded by stressing that he cannot comment on the newspaper's reports "just as one cannot comment on the delirium of an insane person. The article lists fantasies and illusions, which have nothing to do with reality, as well as unrealistic speculations, stemming from obsession and hatred."
How Schechin made his fortune
One version says that the Russian oligarch was "pulling" money from Rosneft's cash reserves: the company – the world's second largest oil producer – had more than $20 billion in assets and in cash in 2020 and $12 billion in 2021.
"Essentially Schechin has been controlling Rosneft's cash reserves for about 20 years," says Vladimir Milov, an opposition politician and economist who served as Russia's deputy energy minister in 2002. "Rosneft is by far the largest cash generating plant in Russia. When the movement of this money is subject to your decisions, then you can direct it wherever you want."
Another version wants Schechin to get a commission from Rosneft's trading revenues through the networks that mediate the sale and transportation of oil internationally. "Rosneft is within the international trading networks. It's easy for Schechin to get involved in this story for personal gain," Milov says. "I am almost certain that those who enter into beneficial agreements with Rosneft are forced to give him a percentage of their revenue."
"When you're an oligarch, you have four ways to make money," notes Anders Ashlund, the Swedish economist who – along with Jeffrey Sachs – acted as Boris Yeltsin's adviser on the economic reforms of the early '90s. "The first is the detachment of assets. The most common are bribes through state contracts. Thirdly, the manipulation of shares and fourthly the taking of loans that are never repaid. Probably, Schechin does a little bit of it."
Unlike the oligarchs who were long-time friends of Putin-- such as his former judo partner Arkady Rottenberg and media mogul Yuri Kovalchuk -- Schechin has not been rewarded with a large percentage of ownership in a business. "Schechin is Putin's servant," Aslund points out.
This can be seen from his low participation in Rosneft. "He behaves less like a modern oligarch, who enriches and consolidates his control over his assets, and more like a Soviet dictator, who simply uses goods and services belonging to the company to satisfy his personal needs and desires," Milov observes.
The ascension of Schechin
Schechin's career began in St. Petersburg, where he was born and raised as did Putin. He graduated from the State University of (then) Leningrad in 1984 with a bachelor's degree in French and Portuguese and a PhD in Economics. He later worked as an interpreter in Angola and Mozambique during the civil wars that broke out in the two countries in the 1980s.
Schechin then returned to Russia to become foreign trade adviser to the government of the city of St. Petersburg in 1988. His term in local government coincided with that of Putin, who in 1991 was an adviser to mayor Anatoly Sobczak on international affairs. As Putin rose in the hierarchy, so did Shechin: they both moved to Moscow in 1996 to work in the office of then-President Boris Yeltsin. In the late 90s, when Putin was director of the Federal Security Service (FSB) - the successor to the KGB - Schechin occupied various senior positions in the Yeltsin government. When Putin became president of Russia in 1999, he appointed Schechin as deputy prime minister.
"In Putin's every leap to power, Schechin was there," observes Thein Gustafson, a professor at Georgetown Law and an expert in Russia's energy industry. "He was protecting the presidential office, coordinating Putin's works and days."
The business path
Schechin made his business debut in February 2003, when he worked with the then president of Rosneft, Sergei Bogdanchikov, in the acquisition of Severnaya Neft, an oil company with deposits in northern Russia, for $623 million. It was an unusual move for the state-owned Rosneft – in which Russia's low-quality oil fields were left, after the best had been taken by the oligarchs since the 1990s – and the first time a Russian state-owned company had acquired a private one.
"This was the first time Schechin appeared on stage. Until then he was a temperamental technocrat," Milov points out. "His rise was steep and completely unannounced."
In a televised meeting with Putin that same month, oil tycoon Mikhail Khodorkovsky -- Russia's richest man at the time, worth $15 billion - he publicly quarrelled with the Russian president, accusing the Kremlin of corruption and declaring his dissatisfaction with the deal with Severnaya Neft. Bad move. Seven months later, Khodorkovsky was arrested for tax fraud and tax evasion, resulting in him losing control of his oil company, Yukos, which was then among the largest in the world. (Khodorkovsky was convicted and spent a decade in prison to be released in 2013). Schechin was appointed chairman of Rosneft's Board of Directors in July of that year, and was Putin's deputy chief of staff.
With Khodorkovsky in prison, Schechin made his move in December 2003: Rosneft acquired Yukos' subsidiary Yuganskneftegaz for $9.4 billion – about 50% of its valuation at the time in question. In 2005, Yukos brought an action against Rosneft seeking 11 billion. dollars, but the following year went bankrupt. Most of its remaining assets were acquired by Rosneft – for a low price – in 2007.
The litigation lasted a decade and moved to seven countries — including the US, and the UK — with Rosneft reaching a settlement with Yukos shareholders in 2015. Khodorkovsky told the Sunday Times in 2008 that the cases against him were "organized by Igor Schechin" as "a pretext for the Yukos raid." Sechin has close ties to Vladimir Ustinov, the attorney general who orchestrated the case against Yukos: Schechin's daughter, Inga, is married to Ustinov's son, Dmitry.
In May 2012, Schechin left office in Putin's close entourage and became CEO of Rosneft. Seven months later, Rosneft acquired the large Russian oil company TNK-BP for 55 billion dollars. The deal yielded huge amounts of money for some billionaires who were investors in TNK-BP, such as Mikhail Friedman, Victor Vekselberg and Leonard Blavatnik. BP acquired a 19.75% stake in Rosneft, which it holds to date, although the company announced on February 27 that it would "withdraw from its stake." (Potential buyers include state-owned oil companies from China, India and Qatar, as well as Rosneft itself).
Rosneft's value increased, and Schechin could now spend huge sums of money. In 2012, he bought the yacht "Princess Olga" and received it the following year. In 2013 he also bought the crescent yacht, the construction of which lasted five years. In 2014 and 2015, it spent 110 million dollars to buy land on the outskirts of Moscow.
Schechin did not finance these purchases from his daily work. In 2013, his income amounted to 50 million dollars, an amount that brought him to the top of the most expensive CEO in Russia, according to the Russian version of Forbes. In May 2014, Schechin filed a lawsuit against Russian Forbes for defamation, and the court ruled that the article in question should be removed from the publication because it created a "negative image" of the plaintiff. The only time Rosneft made Schechin's pay public was in 2015, a month after Putin pointed out while speaking on a TV show that heads of state-owned enterprises should disclose their income. According to the Russian version of Forbes, Schechin earned $17.5 million in 2014.
Other business moves followed. Rosneft paid out 5.2 billion dollars to the Russian state to acquire the majority package of oil producer Bashneft in 2016. Moscow had seized this stake in the company by Vladimir Yevtusenkov in October 2014, after the Russian tycoon was arrested on charges of money laundering linked to his acquisition of Bashneft. (He was released in December of the same year, while the charges were dropped at a later stage).
According to Khodorkovsky, Schechin was the mastermind behind the expropriation of Bashneft, following a similar tactic to the anti-Yukos scheme. "This is the same Igor who has not become smarter in 11 years, but rather more greedy," Khodorkovsky told the Russian daily Vedomosti in 2014.
The Schechin-Putin relationship is a two-way street. Rosneft contributed financially to the construction of the "Palace of Putin", on an area of about 17 acres near the resort of Gelendzhik on the Black Sea coast. According to EU sanctions, "Rosneft has participated in the financing of the Palace's vineyards near Gelendzhik, which is believed to be used by Putin himself." A 2021 survey conducted by the Anti-Corruption Foundation of Alexei Navalny claims that the group's owner is Putin, while the construction of the "Palace" is estimated to have cost $1 billion. The Russian president denies that he owns the band. In contrast, his childhood friend and oligarch Arkady Rottenberg has repeatedly claimed that it is his.
Penalties and yachts
As for Schechin's personal property, sanctions were first imposed by the US in 2014, following Russia's annexation of Crimea. In March 2022, a few weeks after the EU imposed sanctions on him, the French and Spanish authorities targetted the the luxury yachts of Schechin.
The first blow came on March 3, when French customs officially seized the Amore Vero at the port of La Shiota on the French Riviera. According to the official announcement of the seizure, Schechin was identified as the real owner of the yacht. Two weeks later, on March 16, Spanish authorities blocked the Crescent in Tarragona, about 100 kilometres south of Barcelona, while trying to confirm ownership of the vessel.
Most of the luxurious vessels of the Russian oligarchs belong to some offshore portfolio with complex routes. The same is true in the case of Schechin. The registered owner of Crescent is Densiarly Enterprises Ltd/Trident Trust Co based in the Cayman Islands, while Amore Vero appears to be owned by Kazimo Trade & Invest Ltd based in the British Virgin Islands.
Both vessels are operated by Imperial Yachts, based in Monaco. A source from the yachting industry called the company "Putin's people." An Imperial spokesperson told Forbes that Schechin is not the real owner of either Crescent or Amore Vero, but confirmed that the company has been managing the Amore Vero since 2018, when it was "bought by its current owner." (Neither Forbes nor VesselsValue were able to find evidence that the Amore Vero was sold in 2018 or that it has been transferred).
"Imperial is the most secretive company in the industry because of its ties with Russians in power," the same source told Forbes. "If you belong to Putin's inner circle, you use Imperial to buy," he added. Imperial built the Scheherazade – 140 metres long and worth €700 million which the Navalny Foundation recently linked to Vladimir Putin. An Imperial spokesperson told Forbes that the company acted as manager for the construction of the Scheherazade, but currently does not manage the yacht. "Imperial Yachts has no customers – individuals or entities – who have been penalised," he added.
It is rumoured that Schechin controls assets through associates: among them former Rosneft CEO Edvar Hountainatov. After a brief stint as deputy chairman of Rosneft, Houdainatov resigned from Rosneft in 2013 to found his own oil company, the Independent Oil Company. "Many consider Houdainatov to be one of Shechin's 'purses'," Milov points out.
According to VesselsValue, Houdainatov is the owner of the yacht Amadea – 106 metres long and worth $245 million, registered in the Cayman Islands that appears to be owned by Millemarin Investments Ltd again based in the Isles. Amadea is managed by Imperial, and Houdainatov has been linked to Scheherazade as a potential owner-shop window on Putin's behalf. Amadea is tied up in a Fiji port, awaiting a U.S. seizure warrant.
Although Schechin can't access his luxurious yacht, he's still the owner of Crescent and Amore Vero. "Essentially, there is no transfer of ownership" when a vessel is blocked or seized, notes Benjamin Maltby, a partner at London-based law firm Keystone Law, who specialises in yacht issues.
Despite the sanctions, Schechin appears to have found a way to continue paying for the maintenance of the Amore Vero at the La Giota shipyard, where the ship was seized while it was going to repairs. La Shiota's communications officer, Alice Bouaso, told Forbes that the port "receives the payments normally" and that the yacht is still at the shipyard.
Receiving payments from Schechin—even if they are made through offshore companies and third parties—could violate the sanctions, according to Maltby. Bouaso told Forbes that "the shipyard in La Giota will fully comply with the sanctions under the supervision of French customs." A spokesman for French customs declined to comment.
While sanctions and seizures are mounting, Schechin appears to be hiding in Russia, away from his luxury yachts. His last public appearance outside the country was at an economic forum in Verona, Italy last October. On the day Russia invaded Ukraine, Schechin participated in a meeting with Putin and other Russian businessmen in the Kremlin. Otherwise, he remains invisible. A Boeing 737-700 corporate aircraft, registered in Austria with the tail number OE-IRF – operated by Rosneft and allegedly used by friends of the Shechin family to go to the Maldives for leisure in 2016 – flew several flights between Moscow and Frankfurt, St. Petersburg and Dubai in the last two months before the war. His last flight was on February 8, when he took off from Moscow to Frankfurt and returned to the Russian capital within eight hours.
Source: Forbes
