EXCERPTS: GUNVOR’S TIMCHENKO

Wall Street Journal
June 11 2008

On His History, Putin and Gunvor

Gennady Timchenko, the world’s most powerful independent trader of
Russian oil, spoke with The Wall Street Journal’s Guy Chazan about
his past, his politics and his company, Gunvor Group. (See related
article.)

On his history

"I was born in Armenia, in the city of Leninakan. My father was in the
military. He was transferred from place to place because of military
service. When I was 6 we moved to East Germany. I spent there another
six to seven years. Then we moved to Ukraine. In 1970 I started
studying at the Mechanical Institute (in Leningrad). I finished in
1977. I studied to be an electro-mechanical engineer. After that,
I got a job at the Izhorsk plant, near St. Petersburg. It was a big
factory, with 20,000 workers. I was responsible for making equipment
for nuclear power stations — power generators.

"In 1987, Russia decided to change from a monopoly of foreign trade to
give some enterprises the right also to do foreign trade with foreign
countries. Nikolai Ryzhkov (the then-Soviet prime minister) signed
the decree. If you wanted to do foreign trade at the refinery, you
needed educated people. This refinery (Kirishi) got an order. Seventy
to seventy-two enterprises in Russia got the right to trade. What
happened — the management of Kirishi refinery — because it’s not far
from St. Petersburg — came to St. Petersburg to look for potential
staff for this (foreign trade) organization — because they were
supposed to trade petrochemicals, oil etc. They came to one of my
friends, who had a background at the Academy of Foreign Trade. He
was working for a foreign trade organization in Soviet times, in the
energy sector. They invited him as a vice director of their foreign
trade company. He said OK. He called me, and said if you want you can
join us. It was my luck. My luck started there. I got to the right
industry — a very interesting industry."

On his ties to the KGB

"I never worked in the organs. It’s a fairy tale, a conspiracy story. I
was never in East Germany at the same time when they say I served
with Putin. I know all this. It’s a mess what they publish. And it’s
so easy to check.

"I am a businessman, really. I came up from the factory, and then
the Kirishi refinery in 1987."

On his relationship with Putin

"I first got to know him (in) the early 1990s, when we were already
in the oil business. We thought that it was time to reconstruct
the terminal in St. Petersburg. To do that you need to go through
certain procedures with the Mayor’s office. I went there when
(Anatoly) Sobchak was leader. Putin was his assistant. We met —
I was a member of the delegation. It was after he returned from his
service in Germany — say 1991-92. We tried to get this project done
but it never happened. This was the first time we met.

"That time, the Russian system worked this way. You had to have
licenses to sell crude oil, refined products, petrochemicals. It was
big trouble with cash at that time in the country. It was hard to
borrow money, so the ministry in Moscow gave quotas to the refinery to
sell certain amounts of oil. It could even be the mayor’s office. That
was the way the state supported the regions. And that’s why we had
contacts with the mayor’s office. We were the only professional company
in St. Petersburg who got the right to become a "special exporter." We
were qualified. After that the St. Petersburg mayor’s office asked
us to fulfill some of the quotas they had, such as kerosene to sell,
or heavy fuel. We were supposed to sell it and we would bring them
money or food. Barter deals. They needed food urgently. I remember
when Sobchak said, "Guys, we have food for only two days, please do
something quickly." We sold heavy fuel to Iceland, and we immediately
bought from them herring because it’s easy to transport. It was at
least something. That’s how it was. Those were the contacts we had
with that office."

On his friendliness with Putin

"It’s not true. I knew Putin. I knew him through this judo club. When
I went there to fights and he’s there, we would shake hands. I don’t
have time to meet with him. He doesn’t have time to meet with me,
probably. Last time I met him was about two years go. We met with
judo champions, girls and boys. Many people were there — 30 to 40
people. It wasn’t a fight — it was just a meeting of the champions."

On the growth of Gunvor

"We had an opinion with Torbjorn (Tornqvist) that oil prices are going
up. We had an opinion that Russian oil production is going to grow a
lot. So why don’t we create something global, something that will work
on a higher scale? He was in this industry for many years. He started
in BP. And I had certain experience also. There was good chemistry. We
got on well together. He created a very good team of traders. Really
top traders, top of the market. This is one reason. The second reason
is always that we already had certain business for many years in
Russia — him and me. He did his business, I did mine. But when we
joined forces, it was synergy. Last year, we did a $40 billion turnover
… Next year, probably $70 billion turnover. That’s the prediction.

"We have relations with our competitors, with Vitol. I know people
personally there. I talked to one of the owners of the company. He said
I take my hat off to you. You did it very fast. You did a good job.

"My feeling is that it’s because we took steps to go into logistics,
and we’re doing it really well. And investing in logistics. That’s a
serious reason. Second reason — we created offices — maybe worldwide
is an exaggeration, but in Nigeria, Singapore, Amsterdam. It means
we’re starting to buy oil from other countries.

"Why so fast? It depends what you mean by fast. I consider it quite
reasonable, from my point of view. If you look at the Russian market,
all our volumes we get on the tenders. If it is Rosneft, or a private
oil company. A gentleman was here, a senior manager from TNK-BP. I
talked to him the other day. We met for the first time. He said we
have five companies who buy oil from us and Gunvor has the biggest
share of all these 5. Not because of some kind of advantage. It’s
just pure economics, pure business. We can give better conditions. We
have certain know-how in our system, how we give the best price to
them. You take Rosneft. (We have) 30% to 40% of their volumes. But
everything is in open tenders.

"It’s pure economics in our relationship with Gazprom Neft,
Surgutneftegaz, and TNK-BP. We have a big gasoline business, because
we took really good traders. They’re doing a very good job and they’re
very well-paid. It’s market conditions."

B121313303128762055.html?mod=googlenews_wsj