Bootcamp for 800-pound oil gorilla

Gosh, how oil companies spin the world around. It partly drove Bush to take US to war with Iraq, and in Russia, Vlad Putin may be shivering a bit as one 38-year old oil tycoon is now threatening him politically.

Putin isn't happy about the $13.1 billion acquisition of Sibneft by Gazprom, which is majority owned by the Russian government. One reason why Putin is unhappy, explained a think tank friend, was because of the political threat he sees in it from one Roman Abramovich, a London-based businessman.

In 1995, Abramovich acquired the Sibneft subsidiary from the Russian govt. for the junk price of $100 million, which he turned into $13 billion, which Gazprom gladly paid to acquire it. Essentially Sibneft was sold by the government for junk, and reacquired at a premium. It was originally sold in 2003, but a glitch kept the deal on hold.

Abramovich minted money out of Putin's coffers -- which Putin will be unhappy about -- and emerging as a strong political threat to Putin. Putin's history of cleaning out political threats is prolific, but this time he may have missed one.

To gather wealth in Russia, become a politician. Abramovich is using Chukotka, a remote Russia province, as his political vehicle -- he's a leading candidate to be re-elected governor there. Chukotka is attached to the Bering Sea and is the closest province to Alaska (I have written about it here).

He knows Kremlin is ignoring Chukotka, a region yet to be discovered for its natural wealth abundance. As he loads up years of governorship there, he will keep loading his bank account up. Chukchis love him anyways for the money he has invested in the region. However, his reelection is in the hands of Putin.

But the game of political chess has always been on -- it’s just that Abramovich seems to be outplaying Putin.

Abramovich could perhaps smell Putin's approach -- he knew that the Russian government could find a reason to not only acquire Sibneft, but use it as a pretext to jail him for the rest of his life -- tax evasion, illegal oil supply, anything.

For Putin, it would remove a political threat and load up Gazprom, the country's largest oil company and in some ways, his personal piggybank to achieve his political goals.

Abramovich was smart enough to realize that he had to cash in before Putin busted him under a silly pretext. Putin had already used the same trick to get rid of oil tycoon Mikhail Khodorkovsky (MK), who earned billions through Yukos, once the second largest oil company after Gazprom.

Gazprom faced a threat from Yukos, and Putin felt threatened by MK, so both were rubbished for evading taxes. MK was jailed, Yukos broke down and Gazprom acquired its assets for virtually nothing.

But I must admit, Yukos did evade taxes, so Putin isn't to blame for MK's jailing. It was the way he was framed that made it look like a political vendetta. MK was called a political threat to economic success, and Abramovich is the next target. Both are protégés of ex-President Boris Yeltsin, whose democratic mind Putin wasn't a fan of.

Abramovich has somehow gotten out of a jam and made billions, but he still remains in Putin's sights. Expect Putin to strike back -- he is wieldy and unpredictable, which is what makes him so politically successful. There will be many chances for him to crush Abramovich.

Sibneft isn't a big oil company, so its acquisition by Gazprom won't affect us, but it is significantly big enough to push the world supply of oil in Russia & Putin's favor. Gazprom is the world's second largest oil and natural gas holder, so any kind of addition to its assets will affect us and the oil prices.

While my friend spun an interesting Abramovich-Putin theory, I can't buy it completely from an economic perspective.

However, she made it clear how oil rules the planet. Putin values and uses his oil companies, just like Bush does.