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By John Helmer in Moscow

Gennady Timchenko, a powerful Russian businessman, was identified this week in Helsinki as behind International Petroleum Products (IPP), a small trader which won the first 100,000-tonne crude oil loading assignment at Kozmino, Russia’s new oil port on the Sea of Japan.

The news, which a Timchenko spokesman in London is at pains not to deny, reveals a shift in Timchenko’s oil trading geography from the western trades of recent years, into the Fareast and the Asian markets, possibly for the first time. Why Timchenko is trying to reduce Gunvor’s visibility in the oil flows out of Kozmino, and substitute the little known IPP instead, is not known. However, this is not the first of Timchenko’s many lawful and successful businesses which he has sought to keep from public view, even though publicly accessible records confirm the identities and the beneficial links.

IPP won the tender to buy, load and trade the oil that was issued by state-owned Rosneft, the producer and exporter, last November, Rosneft spokesman Nikolai Manvelov told Fairplay yesterday. Rosneft had previously announced that IPP had outbid 14 other traders with the highest price per barrel offer received, and reported the 50-cent per barrel premium IPP was offering for the cargo over the price of the regional benchmark, Dubai crude: http://www.rosneft.ru/news/news_in_press/231120092.html For some reason, the same information cannot be found on the English language version of Rosneft’s website news. Reuters published the news on November 23. The agency followed with a report that Rosneft had signed agreements to load another five tankers at Kozmino in January with 500,000 tonnes of crude. The identity of the trader was not reported.

Manvelov said yesterday he could not say if IPP has won these or future tenders to load Rosneft crude at Kozmino. “We don’t count the number of tenders that various companies win. Some win, some lose. It’s their business.” Gunvor, which is controlled by Timchenko from his base in Geneva, is the largest of the international oil traders taking Rosneft oil to market from such western Russian oil ports as Primorsk. Gunvor is also building new export facilities for petroleum product exports at Ust-Luga on the Baltic Sea, and Novorossiysk on the Black Sea.

Compared to Gunvor, IPP, whose corporate registration has reportedly been found in the Finnish city of Espoo, is minuscule — its net sales in Finland in 2008 were just €12,000, according to a report from Finland. By contrast, Gunvor’s annual revenues in 2007, according to one of its executives, Torbjorn Tornqvist, came to $43 billion; they were expected in 2008, he said, to reach “at least $70 billion, probably more.” Gunvor’s website reports borrowings, but not financial results.

IPP also trades with Gunvor, according to a comment by its chief executive, Sven Olson, to the Helsinki newspaper Helsingin Sanomat on January 13. The paper commented: “Thanks to the Rosneft deal, IPP’s business is expected to grow vigorously.”

The Rosneft spokesman declined to say if Rosneft knows of a business connexion between Timchenko and IPP. “We never comment on the activity of other companies.”

Timchenko is reluctant to confirm the history of his relationship with IPP, as reported by Helsingin Sanomat. According to the newspaper, “what is known for sure is that Timchenko acted as the CEO of IPP…at least until 2001. According to the IPP chairman Sven A. Olsson Timchenko still has a ‘substantial interest’ in the company. Olsson refuses to reveal how much of the IPP stock Timchenko owns.”

Timchenko’s spokesman, Stuart Leasor, a public relations man in London, was asked whether the Helsingin Sanomat report of January 13 “correctly reported the executive, stockholding, business and beneficial relationship between your client, Mr Timchenko, and the oil trader International Petroleum Products (IPP).”

Leasor replied: “Mr Timtchenko is not obliged to provide information particularly where it is not proper for such information to be provided. We are not instructed to provide any private or financial information about Mr Timtchenko nor any private business information to Mr. Helmer.” Leasor, who follows the English version spelling of Timchenko’s name, which appears in Luxembourg and French corporate records, also said: “An article has been published in the Finnish publication Helsingin Sanomat which makes untrue accusations about the businesses in Finland of Guennadi Timtchenko. Allegations that the companies IPP Oy and Merropoint owe in excess of EUR 14 million in unpaid VAT are completely without foundation. All outstanding taxes have been paid. It is true though that that this ruling is being appealed to the Supreme Administrative Court and the companies are confident that his appeal will be successful.” There is no reference in this statement to IPP’s relationship with Timchenko, and Leasor has not responded to the executive and shareholding questions. “It would not be responsible journalism,” says Leasor, “to infer, from Mr Timtchenko’s legitimate refusal to provide Mr Helmer with private information about himself and his businesses, or from our silence for any other reason, that such refusal/silence constitutes acquiescence or that it somehow confirms the accuracy of the information.”

Leasor was also asked to say whether the photograph apparently of Timchenko, published by Helsingin Sanomat this week, is a photograph of Leasor’s client. Timchenko appears to have grown older since a photograph of him, which associates date to about 2003, was published:

Then Now

Leasor did not respond to the question of the identities of the photograph, and a London public relations agency, Weber Shandwick, has also remained silent on confirming the identity of the earlier photograph. According to Leasor, there may be questions that can be answered in future: “If you have any questions please do not hesitate to contact me.”

In May 2008, in one of the most detailed interviews Gunvor has ever given publicly, released by Weber Shandwick, Tornqvist described his group’s margin strategy as carefully calculated not to go too high. “We may have had more experience and knowledge in order to raise the prices. It was like a joint venture. We said, ‘We will sell it for you and you give us what you think is a good margin.’ It was very transparent. Therefore, when they compared what they had done to what we had done, our results were better. It will have been our competitive advantage…

In the long run, I believe that you can be very sharp and make short-term gains, but if you are going to be there long term, sooner or later people will judge you in terms of how you treat them. …Sometimes it is tempting to buy at a certain price, if you think you will get away with it. You might get away with it in the short term, but as far as the long term, it is not in your interests to do so.”

At the time, Tornqvist also denied that Gunvor had grown so powerful in the Russian oil trading market, it could dictate its price, and profit margin, to oil producers like Rosneft. “That is completely untrue. The market is becoming more and more transparent. Even though we have a rather big share of the market – a third or so of the sea-borne volume, in one way or another, goes through our company – we buy the volume on long-term contracts. Sometimes we buy them from other traders. There is always a tender system behind it. A Russian company would have 10 15 other companies calling it constantly and giving it options. Today our yearly contracts are given out through tenders. These are highly competitive. Shell and BP, for example, are invited, plus other major trading houses. 10 of the biggest companies in the world are invited to tender, for example. It is also not in our interest to have everything. We do not want that.”

Does the emergence of IPP for loading tankers with Rosneft oil for sale in the Asian markets indicate a split in margin strategy between Gunvor and IPP, Tornqvist and Timchenko, or between the western trades and the eastern ones?

“The contracts in Russia have become very expensive,” Tornqvist said in 2008. “They are clearly overpriced. Major oil companies go in and they put in a strategic premium on top of the market price. Shell or BP want to have a relationship with Rosneft, for example, and if it is expensive they are fine with that. However, we could never take that view. We feel that the situation in Russia is highly competitive. To be frank, to increase volume there are better opportunities outside Russia than inside Russia.”

“You can go from zero to 100% if you pay the right price. Anyone can do that. Of course no company will give 100%. We buy because it is a commercial business. If we pay the best price we get the oil. If we do not pay the best price we do not get the oil. It comes down to that. We do not receive any favours or anything like that.”

At that time too, Tornqvist said that he favoured expanding Gunvor’s oil business outside Russia in Africa. He did not mention Kozmino. “We are becoming very active, for example, in Nigeria. We have become one of the major gasoline suppliers to Nigeria. This has nothing to do with Russia. We also have a term contract with the Nigerian national oil company. We buy West African crude oil. There are other countries in West Africa where we are increasing our efforts. We are looking to invest in West Africa.”

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