Putin allies' oil feud spills into public view

The blame game over a contamination scandal in Russia’s oil industry has breached President Vladimir Putin’s inner circle.

Igor Sechin, head of Rosneft, the world’s biggest publicly-traded oil company, and Nikolai Tokarev, the boss of Transneft, the world’s largest pipeline network, are embroiled in an unusually public and rancorous dispute over their companies’ responses to the contamination of Russia’s Druzhba (“Friendship”) pipeline, an episode that disrupted exports and tarnished Moscow’s image as a reliable energy supplier.

Sechin and Tokarev have quarreled on and off for over a decade about everything from tariffs to Chinese oil deliveries. But the bitter and public nature of their latest clash is new and puts Putin in a tricky position, two government sources say, since both have been part of his circle of loyalists for decades.

Publicly, Putin has remained on the sidelines while the two men wage a war of words by news release leveling allegations of treachery and incompetence.

“The situation is complicated by the fact that they are both Putin’s friends. That’s why Putin is reluctant to take anyone’s side,” said one of the government sources, who declined to be named because of the matter’s sensitivity.

Tatiana Stanovaya, head of analysis firm R.Politik, said Putin’s hands-off approach also reflected a change in how he governed Russia and a move to distance himself from some domestic matters and focus instead on international affairs.

“The Putin system is still there but Putin isn’t because he’s gone into geopolitics,” said Stanovaya. “And without him everyone fights among themselves.”

The Kremlin has denied Putin spends most of his time on foreign affairs. It did not respond to questions about the nature of the dispute or why Putin had not intervened. Kremlin spokesman Dmitry Peskov has previously said that the row was a corporate matter and not something for Putin to get involved in.

Representatives of Rosneft and Transneft did not respond to questions about the nature of their dispute or whether they believed Putin should mediate. Emailed requests for Sechin and Tokarev to comment went unanswered.

A third government source said he thought Putin was letting the dispute play out because it helped distract from a central and unanswered question: who was to blame for the dirty oil scandal.

Russia is still looking into how the Soviet-era Druzhba oil pipeline to Europe, the world’s longest, was contaminated with organic chloride, a chemical used to boost oil extraction but which can damage refining equipment.

Since the contamination was uncovered in April, Rosneft has publicly accused Transneft of fumbling its response and of failing to devise a plan to prevent it happening again, while Transneft has accused Rosneft of getting its facts wrong and of making unsubstantiated compensation claims.

Transneft needs a truce with its largest customer if it is to draw a line under the scandal and agree compensation deals with it and other oil producers.

Their row hit a low-point earlier this month when Transneft curbed oil intake from Rosneft, cutting Russian production close to a three-year low. The curbs have since been lifted and output levels have been restored, Energy Minister Alexander Novak said last week.