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trutnev

By John Helmer in Moscow

Yury Trutnev, the Russian minister in charge of Russia’s oil and mineral licences, is the top-earning member of Prime Minister Vladimir Putin’s cabinet for another year, according to official income data just released.

For 2008, Trutnev has declared earnings of Rb369.94 million, equivalent now to $10.9 million. Presiding at the ministry headquarters, a stone’s throw from the lions’ cage at the Moscow Zoo, Trutnev was first appointed to his federal job in March 2004. He has been well fed since then. In 2005, according to Trutnev’s report to the government, his earnings totaled Rb211.4 million (then $7.9 million). That was double his first official earnings report for 2004, and almost eighteen times more than the next-placed official, Minister of Transport, Igor Levitin, who reported 2005 income of Rb12 million ($446,482). In 2005, Trutnev’s income was four times larger than the incomes of all the other cabinet ministers combined. In 2008, his pocket is forty-two times deeper than Putin’s and President Dmitry Medvedev’s combined; it is 4.2 times larger than the combined earnings of his cabinet colleagues.

Trutnev’s name in Russian refers to the short-lived bee , whose only work in the hive is to fertilize the queen bee, before he dies. By association, the Russian word “truten” — literally, a drone — has come to mean someone who lives at another’s expense.

There is nothing unlawful about Trutnev’s income, his spokesman has explained, for it represesents deferred earnings from a company he used to own. This was called EKS, a privately owned concern which says it trades in food and runs supermarkets in the central Russian region of Perm, Trutnev’s birthplace. Trutnev, according to his ministry, sold out of EKS in 2006, and has been receiving instalments from the deal since then.

According to the official biography Trutnev posted on a personal website, he was born into a family of oil-industry workers in Perm. He graduated from university as a mining engineer, and after a brief spell working on oilfields, he returned to Perm to work as an administrator of the local sports organization. He was well-known in sports circles as a contestant and instructor in various forms of wrestling and oriental martial arts. As the Soviet Union crumbled, he and his fellow sportsmen went into business together, creating EKS to import Swiss foodstuffs, pharmaceuticals and other goods on order from the region. Russian press estimates suggest that by the mid-1990s, this had made him a comfortable fortune, and he moved into politics, first as a municipal councilman in Perm city, then mayor, and finally, in the year 2000, governor, replacing the incumbent who fallen out of favour with the Kremlin.

To gauge his reputation in Perm following his promotion to Moscow, local elected officials, newspaper reporters, and editors were invited to name three positive things they remembered Trutnev as having done when he was mayor or governor, and one negative thing. Noone managed to recall a single negative. But they were also stumped for positives. According to the editor in chief of Perm News, Yury Puzniansky: “there were no incidents nor any scandals during the time Trutnev was mayor or governor. He was very silent.” Arkadiy Kamenev, Trutnev’s successor as mayor, said: “I do remember his lobbying of a former army building to pass to a church school, and several things like that. I do not remember any very big faults, or anything like that.” A source in the governor’s office said: “We remember Trutnev as a nice man, very powerful and ambitious.”

From time to time, Trutnev is reported in the press as likely to be replaced. If the threats were real, he has beaten them all off. More recently, at the Kremlin’s command, Trutnev has backed subordinates in their pursuit of foreign oil majors like Royal Dutch Shell for environmental violations in the development of oilfields on Sakhalin Island, in the Russian Fareast. He has subsequently defended one of the most prominent miners in Perm, Uralkali, Russia’s largest potash miner.

Trutnev also takes a seat on the ministerial committee which supervises the government’s intentions towards foreign miners. This is the strategic foreign investment review commission, chaired by Putin. Thecommission has met just twice so far. Last October, it approved a joint venture to mine the Grib diamond pipe, in which an affiliate of the LUKoil, an oil company, with whom Trutnev has had a close relationship, held a 50.1% stake, while the De Beers-owned Archangel Diamond Corporation held a 49.9% stake. Additional conditions and costs imposed by the commission caused the deal to collapse in January of this year. The second meeting of the commission followed in February, when an application was approved from the Indian state-owned Oil and Natural Gas Corporation (ONGC) to buy London-listed Imperial Oil, which holds development licences for 17 oil deposits in the Siberian region of Tomsk.

Trutnev’s most recent bid for foreign endorsement came in the form of a buyout and payback scheme, issued last month to compensate foreign miners, who discover deposits they are not allowed to mine under Russia’s strategic investment law. A London veteran of Russian precious metals mining told Minesite: “The minerals law is a major disincentive to exploration as the process is incredibly long, unless you ‘oil the wheels’, so to speak. Even well-connected companies have given up. Now, with the recession, the slump in mining activity is dramatic, with drilling across the country almost stopped. The other nonsense is making any deposit of any size of nickel or platinum group metals strategic. Why? This seems to be a ploy to generate ‘fees’ for obstruction in the state sector.”

“Because the legislation treats oil and gas, and hard-rock minerals, in the same way, mining will always be at a major disadvantage. The lead time and risk profile for minerals is much greater than for hydrocarbons, and this is the root of the failure of the Russian sector. As a geologist I can state categorically that ten years of modern exploration in Russia would double the mineral endowment in any sector of the mining industry. The geological potential is incredible.”

Trutnev has also surred Russian miners to invest abroad. As co-chairman of the Russia-South Africa inter-government commission, Trutnev has backed acquisitions by Russian metals magnates in the South African mining sector, including the abortive attempt by Norilsk Nickel to take over Gold Fields; Victor Vekselberg’s manganese mining project in the Kalahari; and the Evraz steel group’s takeover of Highveld Steel & Vanadium from Anglo American.

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