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One of the penalties for refusing to participate in politics is that you end up being governed by your inferiors. -- Plato (429-347 BC)

Friday, March 03, 2017

The Secret Wealth Of The World's Richest Oil Billionaires

by Zainab Calcuttawala: A policy of nationalizing chunks of an economy inevitably creates oligarchs who skim profits off the country’s natural resources.

As such, you won’t be surprised to learn that the largest energy companies in the world are owned and operated by governments, and they include: Saudi Aramco, Russian Gazprom, China National Petroleum Corp. (CNPC), National Iranian Oil Co., Petroleos de Venezuela, Brazil’s Petrobras and Malaysia’s Petronas. How they’re run varies wildly—as does where their wealth goes.

While we’ve all been inundated with the massive amount of press on the scandals engulfing Brazil’s Petrobras, there are a few that stand out for creating and maintaining some of the world’s most interesting and colorful political leaders, who have grown their wealth through holdings in state-run oil and gas in some cases, and through more direct means in other cases.

Four state-run oil wealth stories stand out in today’s world: Russia, Azerbaijan, Kazakhstan, Angola and Brunei.

Vladimir Putin, Russia
Estimates of Russian President Vladimir Putin’s wealth only comes in ranges because most of his wealth is hidden through offshore companies or under clandestine financial devices.

The lower end of the range sits at US$40 billion – a 2007 figure based on research by mid-level Kremlin advisor Stanislav Belkovsky, which he later said had grown to US$70 billion. At this level, Putin already stands among Forbes’ Top 10 rankings of the world’s richest billionaires, though the magazine commented in 2015 that it could not verify enough of his assets to put him on the list.

Earlier this week, the International Business Times said Putin's fortune could be as much as $200 billion.

The majority of Putin’s wealth comes from his stakes in the oil sector. He is said to own 37 percent of Surgutneftegaz, 4.5 percent of Gazprom.

"At least $40 billion,” Belkovsy told the Guardian in 2007. “Maximum we cannot know. I suspect there are some businesses I know nothing about."

Putin’s trophies of wealth are far from subtle. His $1 billion palace on the Black Sea features “a magnificent columned façade reminiscent of the country palaces Russian tsars built in the 18th century,” according to the BBC, which also procured evidence that a secret slush fund had been created by a group of oligarchs to build the estate for Putin, personally.

It’s definitely not a lifestyle one can afford on a declared annual salary of around US$140,000.

In a 2012 dossier, Former Deputy Prime Minister Boris Nemtsov (later murdered) claimed that the Russian president owns a total of 20 palaces, four yachts and 58 aircraft.

“In a country where 20 million people can barely make ends meet, the luxurious life of the president is a brazen and cynical challenge to society from a high-handed potentate,” he said, according to the Telegraph.

But according to Putin himself, his wealth is not measured in money. In Steven Lee Myers’ book The New Tsar, Putin is quoted as saying: "I am the wealthiest man not just in Europe but in the whole world: I collect emotions.”

"I am wealthy in that the people of Russia have twice entrusted me with the leadership of a great nation such as Russia. I believe that is my greatest wealth."

Azerbaijan
In 2003, Ilham Aliyev became the newly elected president of Azerbaijan. Thirteen years later, his name appeared in the Panama Papers – a massive leak of financial documents from the Panama-based law firm Mossack Fonseca, which revealed the shady financial dealings of some of the world’s most powerful political figures.

Months before the October 2003 presidential elections in Azerbaijan, Fazil Mammadov, Azerbaijan’s tax minister, began paperwork to form AtaHolding – a company that has become one of the nation’s largest conglomerates. It holds interests in telecommunications, construction, mining, and oil and gas for a total value of $490 million, according to the last filings in 2014.

A second entity – this time a foundation – called UF Universe holds more assets, but Panamanian laws regarding the confidentiality of foundations are strict, which makes uncovering dollar amounts difficult.

Aliyev’s two daughters and wife also have links to offshore companies managed by Mossack Fonsenca. Incidentally, Aliyev just named his wife Vice-President of Azerbaijan.

How much is the First Oil Family worth these days? No one really knows, but enough to make it onto this list.

Kazakhstan
Kazakh President-for-life Nursultan Nazarbayev was also named in the Panama Papers as a tax haven owner. He had two companies registered in the British Virgin Islands, which he used to operate a bank account with an unknown amount of funds, and a luxury yacht.

The revelations were particularly loaded with hypocrisy because of Nazarbayev’s push to encourage his country’s wealthy to repatriate funds from abroad in order to make them taxable.

“We’ve raised many rich people: billionaires, millionaires,” he said, when oil prices tanked in 2014 and the government began using sovereign wealth funds to fund operations. “They are showing off; (their) pictures in Forbes… They look good, with makeup, well-groomed, well-dressed. But it is Kazakhstan that enabled you to earn all this money… Bring the money here. We’ll forgive you.”

Angola
Things here may be about to change, because President Jose Eduardo dos Santos has said he plans to step down after decades in power, and won’t be running in August’s presidential elections, but still plans to control the ruling party. Here, wealth is all about Sonangol, which has been marred in controversy since the president last year named his daughter as the head of the state-run oil company.

Angola has massive oil wealth, yet the bulk of the country’s 22 million people live in poverty, and critics say he’s mismanaged the country’s oil wealth and created an elite that largely consists of his massively rich family. But this scheme is being hit hard by the fall in oil prices that began in mid-2014, and the people are no longer complacent in their poverty.

The president’s daughter, worth an estimated US$3.4 billion before she took over the state-run oil company, has been described by Forbes as Africa’s richest woman.

Brunei
And here’s one that’s probably not even on your radar, but it will be—sooner rather than later.

Vast reserves of oil and natural gas have made Sultan Hassanal Bolkiah of Brunei one of the richest leaders in the world. The Sultan is believed to be worth US$40 billion at the low end, and while ‘his’ holdings officially belong to Brunei, in reality they belong to the royal family.

Brunei is the third-largest oil producer in Southeast Asia, and pumps out, on average, 180,000 barrels per day. The royal family has controlled everything to do with oil and gas since the 1970s, and the line here between royal family assets and national assets is exceedingly blurry.

Vulnerable or Not?
The thing about these political oil leaders is that they’re not really vulnerable—yet. It would take an event such as that which brought down Gaddafi (said to secretly be worth US$200 billion) in Libya to change this.

In Brunei, things may be about to change, and the Sultan may find his wealth considerably downsized. Oil production is down 40 percent since 2006, and what’s left has lost a great deal of value due to low oil prices. Nearly 96 percent of Brunei’s exports are oil, gas and related products—that tops even Saudi Arabia, Kuwait and the UAE. Brunei could run out of oil in just over 20 years, but then again, the Sultan is said to have massive real estate holdings to tide him over.

Angola’s president is stepping down and the oil price crisis has hit him hard, but he’ll still control the ruling party and a new president will defer to him (and his daughter).

In Kazakhstan, Nazarbayev is president for life. In Azerbaijan, the family elite is as strong as ever and will continue to be so through any means necessary. In Russia, sanctions simply haven’t worked because they are designed to target those around Putin, and Putin appears to have designed it so they are always vulnerable to him first and foremost.

As Russian businessman and former Putin friend Sergei Pugachev notes to the Guardian, and as reported by U.S. News and World Report: "Everything that belongs to the territory of the Russian Federation Putin considers to be his. Everything – Gazprom, Rosneft, private companies. Any attempt to calculate it won't succeed. … He's the richest person in the world until he leaves power."
-----------------
Zainab Calcuttawala, an American journalist based in Morocco, authored this article contributed by James Stafford the editor of OilPrice.com, the leading online energy news site, to the ARRA News Service.

Tags: Zainab Calcuttawala, Secret Wealth, World's Richest Oil Billionaires, James Stafford, Oilprice.com, To share or post to your site, click on "Post Link". Please mention / link to the ARRA News Service. and "Like" Facebook Page - Thanks!
Posted by Bill Smith at 9:10 AM - Post Link

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