Draft Only: Not for Citation. The Structure of Russias Energy Sector:Expectations and Challenges in Tomsk Oblast.pdf Much of the current academic and policy based securitised discourse surroundingRussia's energy sector treats the country as a unified energy space in political,economic, and social terms. Despite the predominance of and explanatory powerattributed to the bureaucratic power-vertical and vertically integrated corporateparadigms, there exists a body of evidence suggesting that Russia's energy sectoralinterests are fractured along institutional, temporal, and informational lines. It ishoped that conducting research at the source of Russias natural wealth, a moreaccurate picture of the energy sectors structure, the challenges it faces, as well asthe nature of its potential influence may be obtained.It is not too great of a risk to bluntly state that western scientific as well as publicdiscourses concerning the nature of the Russian energy sector are unsophisticatedin terms of the methods employed to decipher the countrys energy strategy.When asked in a recent interview to comment on the social sciences ability to discernreality from myth concerning our understanding of the workings of the stateand society, Simon Kordonsky responded that scientific analysis starts when researchersfocus not on the possibilities of the state to organise social relations, butinstead investigate the limits of states ability to govern social processes. Only thencan the myths surrounding the all powerful leader or state be dispelled. This commentmirrors the debate between positivist (concerned with explaining how thingsare) and normative approaches (concerned with how things should be) in the socialsciences [1]. Whether western analysis is driven by political ideology or a popularlyformed mythology surrounding the object of inquiry, the fact remains thatrecent attempts to investigate the nature of the Russian energy sector are inhibitedby the inability to perceive the fractures among political and economic interests,identify competing elite groups, and understand the institutional conditions thatcontribute to the strategic decision-making process of the Russian Federation. As aresult, the Russian energy sector (or ТЭК in Russian) is presented in scientific andpopular terms as a political and economic monolith.∗ I would like to take the opportunity to thank the Professor Alexei I. Sherbinin, Head of Department ofPolitical Science, and Professor Evegenia Popova, Lecturer, at the Department of Political Science at TomskState University for their assistance and research that has contributed to this preliminary report concerningRegional Perspectives on the Russian Energy SectorD. Dusseault120In order to provide more explanatory value to research into the Russian energysector, researchers need to quit relying on the easy answer that geopolitical analysisalways seems to provide regardless of prevailing domestic socio-economic andpolitical conditions: maximized control over natural resources is inevitably directlyand positively correlated with highly consolidated political power.It will be argued and substantively demonstrated here that moving beyond theconceptual pale of the Kremlins walls and expanding the scope of research concerningRussias energy sector to the countrys regions where the industries arebased will provide a more representative study into the complexities of the countryspolitical and socio-economic fabric. Additionally, new areas for possible scientificenquiry will be unearthed; and finally, realistic assessments of the nature ofRussias energy sector will make significant contributions to pressing long termpolicy matters facing the Russian Federation itself, the EU, and other states in theEurasian context.In order to frame this articles argument concisely, it is crucial that the mainconceptual and methodological weaknesses concerning the existing analysis of theRussian state and the countrys energy sector are presented and examined. Basedupon experienced gained from research conducted over the past several years, fourseparate deficiencies have been identified and will be discussed below in turn. Severalconcepts that are present here have been taken from the authors notes and canbe attributed to expert interviews and discussions conducted by the author withstaff of Kosarev Consulting, Moscow held on the 28th of September 2008 and theCentre for Regional Development, Irkutsk Oblast, Irkutsk on September 4th 2008.Conceptual Weakness I: Bargaining within the Russian federal systemAs stated above, the Russian political system has been treated as a politicalmonolith. During former President Putins first term in office, the concept of theadministrative power vertical was introduced as a mechanism to stabilise the openended political and economic bargaining that characterised federal-regional relations.Western academia has in turn taken the centralisation trend as a sign of theend of federalism as an institutional organising principle of the post-Yeltsin Russianstate. This trend is evidenced through the reduction in the number of federalunits, the dominance of Edinaya Rossia as the party of power in the electoral cyclesand at all levels of the federal power structure, the appointing of regional governorsby presidential decree and the removal of the regional heads from positions in therepresentative branch of power in Moscow.However, just because the institutional distribution of power does not fit intothe vague, dichotomous paradigms (federalism for some is a stagnant, institutionalisedand clearly delineated distribution of power between the federal centre and theregions) supported by western analysis does not mean that various interests fail toespouse competing preferences within the federal power structure. Institutions thatregulate competition among societal elites within a polity are themselves still information and subject to elite bargaining. Powerful actors and interests continue topossess, although arguably to a much reduced degree, the ability to influence theshape and nature of the Russian state.In that context, the Russian federal system and decision making at all levels ofthe hierarchy may not be fully institutionalised according to traditional westernconceptualisations (Max Webers conception of the legal rationalisation of powerDRAFT ONLY: NOT FOR CITATION121comes to mind here). Instead, policy formation is highly personalised; and relatedelite competition is motivated by a pragmatic approach to solving significantmacro political and socio-economic policy issues by limiting the influence of existinginstitutional-bureaucratic structures. In this sense interest competition among and organisationof preferences at various levels of the federal hierarchy may be modelledmore effectively as social networks [2], or nested bargaining games [3, 4].Lack of Substantive Empirical Data: Differentiation in and the nature of rentdistributionThe drive to explain the Putin phenomenon over the past 5 years has left theanalytical field of Russian domestic politics in a difficult position. In the endlessquest to vilify Putin and the state system most analysts give him personal credit for,we have lost touch with the domestic context in which the Kremlins power togovern exists. By focusing on macro-normative debates concerning regime type,analysts and researchers alike have neglected the socio-economic and politicalchanges the 82 regions are currently undergoing. We lack up-to-date data concerningthe socio-economic and political conditions that exist in the regions and howthe variation among the federal units influences the implementation of correspondingfederal policies.If the institutional decision-making process of the Russian Federation is as personalisedas presented above, then it is not unreasonable to expect that the level ofvariation in rent distribution among the regions and the federal centre is highly diversified,too [5]. The way in which various regional groups form their economicand political preferences is influenced by sundry forms of economic, political, andsocial path-dependencies [6].However, even if resources are located at the regional level, the extent to whichregional elites maximise their resource based gate keeping, agenda setting orrent extraction at the expense of one another or the federal centre in the energysector is subject to the physical, economic, institutional and financial conditionsthat are simultaneously determined by structures and actor interests beyond theregional scope [7]. For example, interests may be determined at the federal centreincluding nation-wide heath-care and educational policies; or at the internationallevel where global commodity pricing for local hydrocarbon resources are set. Resourcesare here defined as natural: oil and gas; political: elections and politicalparties; bureaucratic: staffing and cadres which control administrative apparatus;social: ethnicity and identity; and legal: mechanisms to form and shape legislationgoverning the macro political, economic and social rules of the game.Decision making in the Russian federal system is not dominated by the downwardflow of political, economic or social directives from Moscow centre. In factthere is evidence which clearly demonstrates to the contrary that at various institutionallevels, competing interests and institutional structures symbiotically interactto form respective political and socio-economic policies at corresponding layers ofthe federal system [4, 8].Absence of Scientific Enquiry: The dissonance between regional socioeconomicdevelopment strategies & corporate cost / benefit maximisation analysisThe socio-economic situation in many regions has been complicated by the distancingof the socio-economic from the political following the collapse of theCommunist Partys nomenklatura in 1991. Differentiation among socio-economicD. Dusseault122levels in the regions produces unexpected sets of incentives for economic and politicalagency. RF development policy is liberal; poorer regions receive federaltransfers only to the extent that they do not cross a specific line of economicgrowth. Incentives therefore remain for the poorest regions to remain underdeveloped.As long as socio-economic indicators remain low, federal funds stillflow to the region. Even if the average annual Gross Regional Product (GRP)grows, the relationship between the most developed and least developed regionsmay remain unchanged, and in the worst case, the development gap may widen.Within increasingly neo-liberal economic parameters, expectations and legitimacyof the political elite differ greatly from those of the business community.Under ideal market conditions, political elites rely upon service provision fortheir legitimacy in front of the voting and tax paying public. In contrast, businessinterprets its socio-economic value through the spectrum of bottom line profitmaximisation / cost-benefit calculi. This is an extension of the argument put forwardby Kivinen in which various actors frame their particular strategies in a givensector according to their own perceptions of the existing policy environment [9].This gap among expectations and sources of legitimacy for political and economicelites presents the greatest challenge to Russian macro political and economicstrategies. This seems increasing relevant to the argument especially under conditionsthat will see the competition among the regions over federal funding and privatesector investment surrounding the development of their specific resourcebases increase [10].In such a competitive environment, practical experience may demonstrate thatsocio-economic strategies are not meant to fully maximise socio-economic benefitsfor the region, but instead act as a mechanism to extract a suitable degree of rentfrom the federal budget to support regional socio-economic initiatives when businessand regional prerogatives do not fully overlap. The degree to which a region issuccessful in gaining federal support may depend upon the organising and lobbyingability of the regional political leadership and the degree of control over regionalresources; and not along the lines of a simple distribution of decision-making powersbequeathed to the region by the federal centre.Conceptual Weakness II: The Russian energy sector as export onlyRussia is not just an energy exporter, but an importer, a transit state, and a consumer.However, the predominant western conception of Russias energy sectoremphasises the export of hydrocarbons as the single most important priority of thecountrys energy strategy. According to this school of thought, the main purposebehind the export of Russias hydrocarbons is to boost the countrys ability to influencepolicy in Europe and further a field by leveraging energy supplies againstneighbouring states own internal economic and political policies. This energy securitydiscourse tends to over-represent the external strategic importance of thenatural resource export sector while overlooking its value to and dependence onother parts of an integrated energy value chain and the countrys socio-economicand political development on the whole [11].Plainly put, the Russian energy export sector may be a means to serve domesticends [12]. Russias energy complex encompasses other components of the valuechain that have been heretofore missing in the western securitised discourse: powergeneration, grid organisation and transmission; district heating; as well as the procDRAFTONLY: NOT FOR CITATION123essing and refining of hydrocarbons for domestic industrial and retail consumeruse. All these segments of the value chain form an organic whole; and it would bedifficult to argue that as a separate entity, any specific segment could be consideredeither economically commercializable or the sole source of political legitimacy forany elite over the long term.If it is possible to summarise the above conceptual and theoretical arguments ina concise manner, it may be that the drive to understand the Russian energy sectorsdomestic and international potential may be derived from the intuitive understandingon the part of researchers and analysts alike that there exists a huge gapbetween the expectation for natural resource based socio-economic developmentand the states institutional capability to organise disparate societal interests.Therefore by continuing along this line of argumentation, several preliminary andkey observations can be made:1. Actors expectations, the structure of the energy sectors value chains, andthe Russian Federations institutional environment play a significant role in theobserved dissonance between socio-economic priorities and cost benefit maximisationstrategies;2. It is this dissonance, not popularly prescribed regime type which poses thegreatest challenge to efficient organisation of the countrys energy sector; and3. These conditions mirror in detail a classic wealth and power distribution issuefamiliar to all social scientists.Based upon these three general observations, the following research question isproffered: How does the presence of oil and gas influence the regional socioeconomicstrategies within the Russian federal context?At this point in the paper, the argument has reached a crossroads. The challengeis now to synthesise the analysis of the Russian energy sector within the significantlymalleable and opaque institutional conditions of the Russian federal system.After reviewing the data, a general dynamic has come into focus. The distributionof federal and regional competencies in the Russian energy sector is characterisedby influence over and access to various components of the energy sectors economicvalue chain (see Table 1). Information presented shows only firms of federalsignificance and was compiled by author from company sources on the Internet. Thisconceptualised division of economic capacity and political competencies among federaland regional interests is based on similar categorisations, departmentalism versuslocalism, developed by Rutland and Gelman et al. [13, 14].Starting at the extreme end of the upstream sector, ownership of fields and extractionindustries is dispersed among federal owned monopolies, private Russianfirms, private foreign firms, and in some cases, regional governments. Moving onto the value added sector, ownership of refining and other processing industriesroughly mirrors that of the upstream, but is under the auspices of regional governments.Taxes on economic activity are not the only contributions to the regionalbudgets that energy firms make. Other forms revenue streams include surchargeson extracted resources; in kind contributions of refined products to regional institutionsor corporate tax relief for investments made in the region are also made. Inthe downstream, transit, distribution, and export of hydrocarbons and electricitytransmission is the domain of federal monopolies. To distil this division of competenciesfurther and make it relevant in the Russian federal context, it can be saidD. Dusseault124that federal interests control transit and export of the energy sectors production,while regional interests hold sway in the value added industries of processing andrefining of raw materials. This simple distribution will be applied to the case ofTomsk Oblast in the sections that follow.The second section of the paper is composed of several parts that make up thecase study focusing on Tomsk Oblasts energy sector as it has developed within theRussian federal system from 1995-2008. The purpose of the case study is to see ifthe theoretical and conceptual ideas concerning the nature of Russian federalismand the Russian energy sector put forward in the papers theoretical discussion areto any degree, accurate. The degree to which they are accurate will determine theexplanatory power these points may contribute to continued scientific enquiry intothe structure of the Russian energy sector.Tomsk Oblast is located in the West Siberian Federal Okrug, three time zonesto the east of Moscow. Historically, before the coming of the Trans-Siberian railroadin the latter part of the 19th century, Tomsk occupied a position of economicand political importance in western Siberia. For much of the czarist period, Tomskwas a major centre for natural resource extraction, mainly gold, and was the political-administrative centre for a large swath of Siberia, which at some point includedthe northern parts of present-day Kazakhstan. After World War II, Tomsk regainedprominence under the Soviets with the advent of the military industrial and agrariancomplexes to the region. On these two highly centralised economic sectors,Tomsks regional leadership and the fortunes of the population itself depended.During the late Soviet period, significant reserves of oil and natural gas were locatedin the Oblast and the energy sector began to grow in economic prominenceand political stature right up to Perestroika.During the 1990s Tomsk suffered through many of the familiar political andsocio-economic traumas associated with the late Perestroika and early Yeltsin periodsof the early to mid 1990s. With the soviet and later Russian federal centresforming no more than institutional power vacuums, financial and political supportfor the regions from Moscow ceased to exist. Tomsks federally orientated energy,military and agricultural complexes atrophied. Political turmoil ensued; and manymembers of the regions soviet era Communist Party nomenklatura gradually lostpositions of economic, political and social significance as the decade moved on(see Figure 1) [15, 16].The reasons for the elite transformation in the region are manifold. Yet it ispossibly to divine several of the major contributing factors: general economicdownturn due to economic liberalisation programme; lack of investment and maintenancein regional industries; the decline of the military industrial complex; a declineof export revenues; and the influx of Russians from near abroad [17. P. 1114].While the federal level political and economic institutions in Moscow werepowerless to reign in the forces at work in the regions, new interests, some based inthe old soviet cadre, others in industry and still more in soviet society itself filled inthe institutional gap [15, 16]. Pressures from these groups espousing their owncompeting interests gained more say in the formulation of the regional political andsocio-economic agenda-setting observed both during perestroika and the Yeltsinadministrations first years in government after the coup in 1991.DRAFT ONLY: NOT FOR CITATION125The various financial, political and social issues that the leadership of TomskOblast was dealing with at the time were not unknown to the other Siberian regionsor throughout the Russian Federation on the whole following the collapse of theUSSR and the shelling of the State Duma by Yeltsin in 1993. Instead of going italone, Tomsk Oblast was a member of a collective bargaining organisation knownas the Siberian Agreement [17]. Many of the federal units, from the eastern edge ofthe Ural Mountains to the Kamchatka peninsula shared Tomsks economic andpolitical troubles. Although they were an economic, socially and politically heterogeneousgroup, the 19 regions were able to find a common language of concernsvis-à-vis Moscow centre.The agreement was not formed to seek independence from the Russian Federation,but essentially was an attempt to re-address the historical economic and politicalimbalances the regional leadership perceived as the major contributing factorto Siberias persisting under-development despite its phenomenal endowment ofnatural resources [17. P. 1148]. In fact it can be argued that the Siberian Agreementwas a collaborative response to the major challenge to the stability of the Russianfederal system at that time: the organisation of rent distribution among a largegroup of political units that are economically, politically, and socially heterogeneousunder conditions of widespread institutional uncertainty.Despite the awarding of concessions to the members of the Siberian Agreementby Yeltsin, the Agreement slowly began to fade in terms of political relevance bythe mid-1990s. These concessions included increased export quotas, a regional collateralinvestment fund, a regional oversight commission, a trade committee, andthe establishment of a 20% regional structural fund [17. Pp. 1143-1144]. The SiberianAgreement is an important event in the post-coup history of Tomsk Oblast.The appearance of the grouping itself brought to the fore the overarching, sharedconcerns of individual Siberian regions, of which Tomsk Oblast was one. This isnot to say that, the Siberian Agreement was an effective tool to fully re-address theeconomic and political balance between the federal centre and the regions in thelong term, but it succeeded in brining one important fact to the attention of thepowers that be in Moscow: in order to secure the stability and longevity of the nascentRussian state, the political and socio-economic aspects of persisting underdevelopmentin Siberia would have to be dealt with in the near future.The basic document outlining the strategic approach to the regions socioeconomicdevelopment was formulated by an independent group of developmentexperts and approved by the regions high committee for economics in 2005. Theapproaches to the regions social and economic needs were novel in the Russiancontext at the time due to the programmes adoption of a long term scope, yet simultaneouslyfocusing in on the fulfilling of concrete priorities that would contributeto the overall improvement of the regions socio-economic status within theRussian federal system [18. P. 4] (see Table 2).To fulfil the strategys main goal, the authors outlined several areas in whichthe regions economy would need to be modified. The regions industrial outputwould have to become more diversified, thus moving away from traditional resourceextraction and the industrial production of the MIC; the conditions for smallto medium size businesses would need to be set so that the economy could open upnew areas of service provision and production while simultaneously allowing forD. Dusseault126increased economic competitiveness and growth in Tomsk Oblast; and as a knockoneffect, the successful fulfilment of the latter two conditions would allow for thegradual improvement of the living standards of the general population as well asthe overall socio-economic status of the region within the federal context.As we will see later on, one of the ironic twists that the strategy provides concernsthe current main sectors of the regions economy. While acknowledging thatthe present industrial base of the region is a major contributor to the regions continuingsocio-economic development, strategic development as envisioned by theregional administration will inevitably reduce the socio-economic and politicalimportance of the resource extraction industry and to a lesser extent, the MIC sector,upon which the whole strategy is currently based. The inconvenient questionthat crops up at this point is how do the regional administration and the affectedindustries come together and form a stable consensus regarding the nature of theregions socio-economic development? This question is not only relevant for thepolicy makers and vested interests involved in the process themselves, but for researcherswho are trying to make sense of this complicated process (see Table 3)[19. P. 8-9].Based upon the work of Aalto et al. and Dusseault an effective approach tocategorising how actors formulate their strategies and then compete for them underchanging institutional, physical, financial and informational conditions has beenapplied to the Tomsk Oblast socio-economic development strategy [8, 20].By reading signals from the policy environment to which each of the four variableslisted above contribute, actors form policy expectations respective to theirconceptualisation of the existing policy space. Subsequently, understanding thatboth actor behaviour and the policy space itself is volatile and subject to changeover time, actors assess changes in the environment and anticipate the level of riskthese changes may bring to the success or failure of their chosen strategy. In thefinal stage of policy formation, actors then adopt concrete contingency plans thatcorrespond both to their expectations and the anticipated risks derived from themorphing policy environment.The expectation model is applied to the Tomsk case in Figure 2. By juxtaposingthe framework on the strategy, several crucial points and challenges becomeclear, especially concerning the influence that the federal structure and the internationalexternalities pose to the regions long term socio-economic development. Itis of particular interest to the current argument the observed vulnerability of theregions energy sector both federal interests and the commodity prices set at theglobal level. As stated earlier in this section, the major irony of the regions developmentstrategy focuses on the central role that the energy sector will plays in thediversification of the regional economy away from the drilling of oil and gas.Additionally, the regional administration has admitted the underdeterminedstatus of resources between the federal centre and the regions as well as the worldprice for the regions hydrocarbons are considerable risks to the regions long terminterests.These challenges will be partly clarified when the question concerning the intereststhat control of the regions resources along the various parts of the valuechain within the Russian federal context is presented in the next section.DRAFT ONLY: NOT FOR CITATION127Tomsk Oblast, in which one of the major natural resources is oil, has made thedecision to develop Greenfield projects. In a region which occupies one of the top spotsin hydrocarbon extraction in Western Siberia, since 2005 the amount of oil pumped outof the ground has gradually begun to decline. The total reserves of the region haveshrunk, symbolised by lower growth in hydrocarbon recovery. [21].It can be argued that over the past fifty years, the fortunes of the Soviet Unionand later on the Russian Federation energy sector have mirrored the specific aspectsof the countrys economic and political evolution. Besides referencing theobvious peaks and valleys in hydrocarbon production from the late 1960s to thepresent day, the parallel between the energy sectors condition can be mappedthrough the development of the relevant federal and regional legislation. Followingthe legislation from 1995-2008 (for a chronicled list of the relevant energy sectorlegislation from 1995-2008, please see Appendix I & II at the end of this paper.), itwas found that the executive and representative branches of Tomsk Oblasts leadershipunderstood the need to create the corresponding legal conditions for the regionsresources and industry to return to profitability in the evolving political environmentof Yeltsins Russia.From the outset, there has been a consolidated legislative effort to set the basicrules governing sectors key economic and legal aspects including ownership, licensing,and taxation under market conditions. There have also been gradual attemptsto leverage the regions reserves against capital investment in the varioussectors along the energy value chain. Finally, there is evidence that the local administrationand the Duma have a great interest to develop the regions resourcesbeyond the existing parameters. Actions taken include organising regional seminarsand international congresses to address the future directions that the industrymay take such as technical development and regional gasification of power generationfor industrial and domestic consumption.However, as the opening quote demonstrates, the prognosis for the regions oiland gas industry is not particularly optimistic in the short to medium term. However,both the regions administration and the companies involved in the oil andgas industry in Tomsk Oblast have several strategic options open to them to dealwith the increasing decline of the brownfield projects. Before beginning to tacklethe structure of the regions oil and gas industry and what it means to the administrationssocio-economic plans, it may be helpful to look at the regions productionin the federal context. Table 4 outlines Tomsks oil and natural gas productionin comparison with other regions either currently or in the future, earmarked tobegin production of oil and natural gas.At a quick glance, the numbers for oil and gas production compared with thetotal produced in Tyumen Oblast are small in the federal context. However, accordingto company sources and the local administration in Tomsk, the regionslargest oil company, OAO Tomskneft VNK, activities on the ground contributed3.6 billion RR to the local budget in 2007. OAO Tomskneft VNK is currentlyowned by federal monopolies Rosneft (50%) and Gazprom (50%) [22. The company,once owned by YUKOS, controls over 80% of the regions producing fields,holds 17 production licensing agreements in Tomsk Oblast, along with a further 9licenses for developing unexplored blocks in the region. In 2008 the company isexpected to pump close to 8.5mt of oil in Tomsk Oblast. Continuing investment inD. Dusseault128the regions energy sector will garner a further 11.3 billion RR totalling 4.5 billionRR in taxes for Tomsks budget in 2008 [21]. However, the predictions forTomsknefts production over the next several years are not entirely encouraging. Itis expected that by 2011 growth in the companys production will only total .6mt.From the outside the numbers for Tomskneft do not bode well for the regionsbudget or its socio-economic development strategy.What may provide both the regional firms and the administration with strategicoptions is the move to explore Tomsk Oblasts territory for hydrocarbon reserveson the east bank of the Ob River. Tomsk Oblast is dissected almost down the middleof its territory by the Ob River. To the west and north of the river lie the bulk ofthe regions oil and gas reserves already under production. It is these fields thatform the base for the regions oil and gas production. However, due to the steadydecline in these fields production, the local administration and sector interestshave begun to look towards the right bank of the Ob to replace and significantlyincrease the regions falling production [10, 21].Approximately 20 companies have been active in developing the regions oiland gas resources [21]. Smaller firms such as Tomskburneftegaz, Russneft, ImperialEnergy, and Petroneft Resources Plc could be responsible for 20-30% of theregions output by 2010 according to the regional administrations estimates [21].These companies are contributing to the diversification of the industrial activitiesregions upstream sector which is also populated by major firms Gazpromneft,TNK-BP, Gazprom, and Surgutneftegaz (see Table 5).After an analysis of the relevant federal and regional energy strategies andcomparing them with those put forward by the companies themselves, we can applythe expectation model to a general set of shared expectations among industrialinterests. As a result, we can see that the businesses are primarily concerned withmaximising their economic profit from the hydrocarbon resources under their control(see Figure 3) [12].Despite the industrys obvious market oriented strategy, businesses and the regionaladministration seem to have some common interests. Those include competitivenessof the regional economy; the effective exploitation of the regional hydrocarbonresource base; the resolution of competencies and relations between thefederal centre and the regions concerning the countrys oil and gas resources; theglobal pricing system for regional oil resources, and a well-educated and competitiveworkforce.Conversely, there are some areas where the sides preferences do not fullyagree. It is not entirely illogical to expect that the regional administration would bein favour of more budgetary proceeds for its socio-economic development plansbased upon the exploitation of the regions hydrocarbons; while simultaneously,the companies are seeking to reduce their socio-economic burden in favour of capitalinvestment and tax payments to both the federal and regional authorities. Additionally,the companies, under structural conditions that emphasis export, may seethat the most effective way to maximise the value of the resource base is to extractand export as much and as quickly as possible, while the regional authorities ontheir part would prefer to have the resources value be spread over a longer term;especially since their constituency is not international consumers, but the local votingand tax paying population.DRAFT ONLY: NOT FOR CITATION129The main purpose of this paper has been to demonstrate by expanding the scope ofongoing research into the nature of the Russian state and the countrys energy sector.By applying structuration and expectation models, a more detailed picture of how specificgroups form policy through political and economic driven agency under complexinstitutional, financial, informational and physical conditions would be produced.While not complete in any sense, the analysis has fulfilled its primary role of illustratingthat the Russian state and one of its main economic engines, the energy sector, areneither economic nor political monoliths dominated by an omnipotent set of intereststhat many researchers take as scientifically manifest.To the contrary, the relationship between the business community and local authoritiesin Tomsk may be characterised to a large degree as symbiotic. There is afeeling, although still unsubstantiated, that both industrial and regional administrativeinterests understand the general rules that regulate socio-economic developmentand resource sector business activities in the Russian federation. Neithersides preferences may fully correspond. However, it seems that there is at least ageneral understanding among the respective players that as long as regional administrativeand business interests play by the established rules whatever they may be,federal authorities will allow socio-regional economic development and the domesticenergy sector to develop without too much interference.Despite the added explanatory value the analysis has provided, it has producedmore questions that need to be investigated at a later date: Besides the maturation of Tomsks resource base, what are the other specificchallenges to both the regional administrations socio-economic development planand the oil and gas industrys long term growth strategy? How do the regional authorities and the companies involved in the developmentof Tomsks oil and gas industry see their relationship evolving?The two questions above concern the specific nature of relations among industrialand regional administrative interests. More specifically, the research has yet touncover to what degree developments in the energy sector are influencing the successof the regions socio-economic development strategy. What is it about federal-regional relations that concern both the companiesin the Russian energy sector and the regional administration? To what degree is the federal government active in the effective organisationand implementation of the regions socio-economic development and the countrysdomestic energy sector?The last two questions are aimed at examining to a greater degree what exactrole does the federal government and to a greater extent the federal system itselfplay in socio-economic development and the energy sector itself. As demonstratedin the tables, the energy sector is more diversified when we examine the firms andtheir activities at the regional level. It may hold true that in the export sector, federalmonopolies hold sway, but there is evidence here that suggests more and moreinfluence is being granted to smaller firms, who may be able to better adjust to thecomplexities associated with regional, extraction, value-added, and downstreamactivities along the value chain.D. Dusseault130Appendix I: Legislation in Tomsk Oblast Gas and Oil Sector 1995-20011995 1996 1997 1998 1999 2000 2001DecisionN 123TomskOblastDuma25 March1995Socialeconomicdevelopmentof oiland gasproducingregions ofTomskOblastResolutionN4917 March1997Creationand DevelopmentofProductionof CompetitiveOil& GassectorEquipmentResolutionN496 Feb 1998Creation ofthe workingcommitteeon relationsamongYUKOS,VNK andTomskOblastAdministrationResolutionN380-p13 Sept1999Forms ofSupport forconstructionof StrezhevskogoOil RefineryOrderN82-p10 March20001st RegionalConferenceOil & Gas2000Order N4-p12 Jan 20012nd RegionalConferenceOil & Gas2001ResolutionN25520Sept.1995Realisationof TomskOblastsGasificationProgrammeResolutionN3294 Dec 1996Appropriationofsalaries forexpertiseconcerningcompaniesin the oiland gassectorResolutionN36217th Dec1997 EstablishmentofpubliccompanyMezhregiongazTradingHouseResolutionN23729 June1998Creation ofJoint StockCompanySibirgazifikatsiiResolutionN12031 March2000OblastBudget FuelSubsidies toregionalInstitutions& FirmsResolutionN2223 Jan 2001Emergencymeasures forOil relatedCatastrophesDecisionN 568TomskOblastDuma6 June 2000OblastGuaranteeofRepaymentof FederalCredits toOblastFirms1992-1994ResolutionN 28321 June2000Reactivationofinactivewells inTomskOblastDRAFT ONLY: NOT FOR CITATION131Appendix II: Legislation in Tomsk Oblast Gas and Oil Sector 2002-2008D. Dusseault132Table 1: Breakdown of Company Activities along the Oil and Natural GasEnergy Value ChainCompany Type Upstream Sector Value-added Sector Downstream SectorFederal Monopoly Gazprom, Gazpromneft,Rosneft,Rosneft, Gazprom,Gazpromneft Tranzneft, TranzgazRegionally owned Bashkortneft, Tatneft Bashkortneft, Tatneft -Privately Owned Lukoil, TNK-BP,SurgutneftegazLukoil, TNK-BP,Surgutneftegaz -Table 2: Selected socio-economic Indicators for Tomsk Oblast (from Goskomstatstatistics (Ref. needed)General Socio-Economic IndicatorsPopulation (2006 in thousands) 1033,1Industrial Production Resource Sector (% of RF) 1,9 %Agricultural Production (% of RF) 0,6 %Gross Regional Product (2005 in billions RR / % ofRF)158219 / 0,9 %Average Personal Income (in thousands RR / month) 9896,5Unemployment (in thousands / %) 47,8 / 9%Table 3 Tomsk Oblast Selected Industrial Production 2002-2004Product 2002 2003 2004Oil(million tonnes)10,6 (mt.) 13,7 (mt.) 15,9 (mt)Natural Gas(million cubic meters mm3)4444,1 (mm3) 5264,3 (mm3) 5337,8 (mm3)Gasoline (thousand tonnes tt) 35,2 (tt) 35,6 (tt) 36,4 (tt)Polypropylene(thousand tonnes tt)106,2(tt) 105,4(tt) 106,9(tt)Electricity(million kilowatt hours mkh)4665,8 (mkh) 4973,4 (mkh) 5325,5 (mkh)Table 4: Tomsk Oil and Natural Gas Production in the Federal Context (fromGoskomstat statistics (Ref. needed)Region Oil and Gas CondensatePercentage of national gross 2005 /amount (million tonnes)Natural GasPercentage of national gross 2005 /amount (billion cubic meters)Tyumen (Total)Khanti-MaisiiskiiYamalo Nenets68,1% / 320 mt57,0 %10,8 %91,3%/ 585 bm304,3%87,0%Irkutsk 0,03% 0,8%Sakha 0,09% / 0,412 mt 0,2% / 1,6 bm3Tomsk 2,5%/ 11,7 mt 0,8% / 4,638 bm3Sakhalin 0,85% 0,3%DRAFT ONLY: NOT FOR CITATION133Table 5: Breakdown of the Firms in Tomsk Oblast along the Energy ValueChain (from relevant corporate sites on the Internet)Company Type Upstream Sector Value-added Sector Downstream SectorFederal MonopolyVostokGazprom (OAOTomskgazprom); Gazpromneft;Rosneft(Tomskneft VNK)Tomskneftekhim/Sibur(Gazpromneft /Sibneft);Rosneft (Tomsknefteprodukt& Strezhevoi NPZ)VostokGazprom(OAO Tomskgazprom);Gazprom TranzgazTomsk;TranzneftRegionally owned ? ? ?Privately Owned(f = foreign owned)TNK-BP; Surgutneftegaz(?); ImperialEnergy (f);Tomskburneftegaz;Russneft (ZAO TomskayaNeft/ Sobolnoye);Petroneft Resources,Plc.(f) & VTK(?)Petroneft Resources Plc.(Kolpashevsky region)Imperial Energy (f);Petroneft ResourcesPlc.(f)Figure 1: Transformation of the Tomsk Elite 1986-1993ConservativeCPSU basedelite; economicinterests definedby the militaryindustrial andagrarian complex;later oiland gas interestsappear.Hard lineCommunistsLate Soviet Perestroika Pre-CoupReformCommunistsRadicalreformersModerateReformersPost-Coup -Sectoral InterestGroups: fuel &energy complex,construction,food industry,SMEs, & theexecutive branchof the regionaladministration.D. 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