Russia plans to combine its oil giants Rosneft, Gazprom Neft and Lukoil into a single super-entity. Moscow would thus create a real oil empire. If the temptation is great, this merger is also a double-edged sword.
Faced with economic pressure from the West and an increasingly restrictive economic environment, Russia is reportedly considering bringing together its oil giants Rosneft, Gazprom Neft and Lukoil under the same banner. According to information from Wall Street Journalthere would be several scenarios on the table. One of them would see state giant Rosneft absorb state producer Gazprom Neft and independent group Lukoil. All three are currently under American sanctions.
This strategic initiative aims to maximize its energy revenues and further establish its influence on the global oil market. By merging these three entities, Moscow would simply create the second largest oil producer in the world after Saudi Aramco. A behemoth which would produce almost three times more than the American oil giant Exxon. According to the Financial Timesthe name of Alexander Yukov, CEO of Gazprom Neft, is said to be circulating as a possible new boss of a possible unified Russian state oil company.
The energy sector remains the backbone of the Russian economy
Russia has faced increased fiscal challenges since Western sanctions intensified in 2022. Despite high inflation and ever-rising defense costs, the energy sector remains the backbone of the Russian economy, supporting growth that has surprised observers despite international restrictions. By grouping its major energy producers under a single banner, Moscow hopes to simplify export management, reduce internal competition and optimize revenues by increasing its pricing power upwards.
The strategic advantages of a merger Russian oil giants
The prospects of this merger present several strategic advantages for Moscow. First, it would make it possible to tighten government supervision over companies, limiting tensions between the different leaders, often close to the Kremlin. This consolidation would also facilitate access to Lukoil’s international resources and networks, particularly in the Middle East and Africa, which could improve the possibilities of circumventing sanctions. It would also put an end to competition which sometimes drove prices downwards towards customers like India and China. Finally, this “maxi-group” strategy should also strengthen Russia’s resilience in the face of Western financial restrictions, providing better protection for Russian energy infrastructure.
Economic risks and political obstacles
However, this merger is not without risk. The integration of these behemoths could temporarily slow down their productivity, thus harming immediate gains, we can read on Markets Insider. Russian financial analysts point out in the Wall Street Journal that a unified giant would also be an easier target for Western sanctions, unlike separate entities which, for now, favor effective circumvention methods.
Politically, opposition from some influential leaders like Igor Sechin, CEO of Rosneft, and Alexei Miller of Gazprom complicates the situation. These powerful actors, known for their autonomy and personal ambitions, are traditionally reluctant to a merger that could limit their individual influence and reduce competition between state actors, which sometimes works in their favor.
A discreet response from the Kremlin
The idea of a merger is not new and regularly comes back to the headlines. For the moment, the chances of success are at least hypothetical and no major operation in the energy sector has been carried out over the last decade, due to the reasons already mentioned and also the funds necessary to acquire the private company Lukoil. For the moment, Vladimir Putin has not yet decided on the question. It would be the Minister of Energy, Sergei Tsivilev, who personally submitted this idea of a unified state oil company to the Russian president, specifies the Financial Times. But Tsivilev is not just anyone. He is the husband of Putin’s niece. And his appointment is the umpteenth sign of a desire to strengthen state control over national fossil resources. Enough to reinforce the idea that this project could become reality in the months to come, redrawing the global energy map in the process.
