Russia should reject oil middlemen: Transneft

By Robin Paxton

MOSCOW (Reuters) - Russia, the world's No. 2 oil exporter, has outgrown its need for small, intermediary traders as its own producers have developed into major international players, the head of the country's oil pipeline monopoly said.

Transneft (TRNF_p.RTS: Quote, Profile, Research, Stock Buzz) President Nikolai Tokarev blamed offshore middlemen for oil supply disruptions to the Czech Republic in July that spilled over into the political arena, and said only large traders had a place in today's Russian market.

"Small companies are making a mess, disturbing things," Tokarev said at the second Reuters Russia Investment Summit. "Corruption stems from the large quantity of intermediaries."

Tokarev, a close ally of Russian Prime Minister Vladimir Putin from his KGB days, said the appearance of so many small companies was a legacy of the 1990s, when newly privatized Russian oil companies were emerging from the collapse of the Soviet Union.

"That period has passed. Today, we have a different LUKOIL, a different Rosneft," he said, referring to Russia's two largest oil companies. "We will move more toward direct contracts."

Russian oil supplies to the Czech Republic unexpectedly halved in July from the usual 500,000 tonnes after Prague signed an agreement to host a radar base as part of a U.S. missile shield -- a move which was strongly opposed by Moscow.

Tokarev said the supply cut was not political but arose from disagreements over pricing in a complex chain of deals among offshore intermediaries. Czech buyers were now discussing direct contracts with Tatneft (TATN3.MM: Quote, Profile, Research, Stock Buzz) and other suppliers, he added.

"The situation became extremely politicized," Tokarev said.

The first to approach Transneft after supplies to the Czech Republic were cut, he said, was the U.S. embassy in Russia. Next came the British embassy.

"The last people to approach me were the Czechs! And they understood, more or less, how the problems arose," he added.

Tokarev said Tatneft, a mid-sized oil firm based in the Russian republic of Tatarstan, had offered to sell its oil to the Czech Republic through direct contracts before the supply disruption, but its offer had been rejected.

Russian companies now have the size and expertise to handle their own international sales, Tokarev said.

He said his own company -- which is expanding pipeline capacity to accommodate Russian oil majors' plans to boost production -- had no say over where this oil would be delivered.

"I don't own any oil. I don't decide whether I want to sell to somebody, or not to sell to somebody."

Large traders, however, still had a role to play in delivering Russian oil to market, Tokarev said, citing Vitol, Gunvor and Glencore as examples.  Continued...