Transneft under fire

Public activist and popular blogger Alexey Navalny, who previously published resonant materials about finances of Russia's large state companies, has posted scanned copies of documents that allegedly testify to serious violations by Transneft in the process of the ESPO oil pipeline construction. According to Navalny, the total embezzlement of funds during the construction was $4bn at least. The fact of availability of these discrediting documents to the public and their real value are to be assessed by competent authorities. It is not ruled out that part of the accusations will be denied. But even without legal matters of this case there is a ground to think about risks accompanying Transneft's work. The company has to build quite costly facilities that were designed amid the perception (that is currently treated with skepticism by many observers) of Russia's ability to provide for constantly growing exports of hydrocarbons in all directions. The necessity to simultaneously invest in such duplicating projects as the Samsun-Ceyhan and Burgas-Alexandropoulos pipelines may be a problem. At the same time, there are domestic projects, e.g. the Zapolyarye-Purpe pipeline. There may be not enough money to fulfill all the plans, e.g. oil companies have been already made partially responsible for the work on the latter project, although such expenses are not within their core activities. Meanwhile, it is impossible to constantly raise prices of oil transportation. In such conditions it is obviously important for the company to optimize expenses on building infrastructure facilities and adhere to a strict financial discipline. This thesis deserves attention and implementation even without media scandals caused by Navalny's posts.

By Stanislav Mitrakhovich, NESF leading expert