The “secret weapon”… Young blood in the Kremlin to save the Russian economy

Russia urgently needs to develop new markets for its oil and gas companies, as Western sanctions cripple the backbone of its economy.

Russia relies, according to the American Wall Street Journal, on a 37-year-old former banker at Morgan Stanley to keep the profits flowing.

The American newspaper reported that Pavel Sorokin, the Russian deputy energy minister, is part of a cadre of young technocrats with deep knowledge of the West, who rose quickly to the upper echelons of leadership in Moscow.

Sorokin, who studied financial management in London, negotiated deals in Africa and the Middle East, and played an early role in the development of OPEC Plus, the partnership between the Russian oil industry and the Organization of the Petroleum Exporting Countries.

And last month, Sorokin played a key role in setting fixed prices for the oil of Russia’s main export, the Urals, rather than letting markets determine the amount of fees for companies.

People familiar with the matter said Sorokin last month played a key role in setting fixed prices for Russia’s main export crude, Urals grade, rather than letting markets decide on corporate fees.

The decision is expected to direct $8.2 billion in taxes to the Russian treasury.

Sorokin and his colleagues have so far weathered sanctions in a way that has put Russia under severe economic pressure, but not yet incapacitated.

That task will become more complicated as the long-term effects of the war take hold, but analysts say they have outperformed expectations over the entire first year of the war.

Victor Katona, chief oil analyst at Kepler, said Sorokin had become Russia’s “secret weapon” in limiting the impact of Western sanctions, pointing out his belief that many of Ukraine’s allies underestimated the expertise of the new generation of Western-trained policymakers in the Kremlin.

These newcomers are increasingly favored by Russian President Vladimir Putin, who speak fluent English and adhere to his nationalist ideology.

Katona said Sorokin “is an example of something that didn’t exist in the Soviet Union… He is part of a breed of young people who had choices and decided to work for the Russian government.”

The war in Ukraine has shaken up global energy markets and longstanding alliances, while Russia, once seen as one of Europe’s most profitable energy customers, now sends much of its production to India and China, which usually buy it at well below market prices.

Partly because of those discounts, Russian oil and natural gas revenues fell 46% in January compared to the same month last year, according to data from the Russian Finance Ministry.

To offset the loss of those profits, Russia needs new trading partners, and Sorokin and his colleagues seem to be making some inroads. Russia exported more than 8 million barrels of oil in January, according to Kepler — even though it usually sells at a discount of $1. About $30 a barrel.

Sorokin’s efforts included a visit last September to Brazzaville, the capital of the Republic of the Congo, when he departed from a 20-hour trip to find Denis Sassou Nguesso, President of the Republic of the Congo, at his reception.

Over the course of two days, during which he often sat on golden chairs amid the palms of the presidential palace, Sorokin struck a deal for Russia to supply oil products to the Republic of the Congo and for two Russian companies to build a 625-mile pipeline worth $850 million, according to a document seen by the Wall Street Journal. Current and former officials familiar with the deal.

The month before, Sorokin had met a delegation from Afghanistan, which is now run by the Taliban. A former aide familiar with the meeting said Sorokin was neither surprised nor confused when the Afghans offered to trade raisins and herbs for fuel.

The Taliban government and the Kremlin later revealed an agreement to supply Russian fuel to Kabul.

Inside the Kremlin, other rising officials include Russian Deputy Finance Minister Alexei Sazanov, who was Oxford-educated and worked with Sorokin at Ernst & Young in Moscow. Along with Sorokin, he plays a key role in finding ways to bridge Russia’s rapid deficit.

Denis Deryushkin, a former Bank of America analyst, became head of research at the Department of Energy at the age of 29, representing Russia at OPEC advisory meetings aimed at helping maximize oil prices.

There is also Putin’s powerful economic adviser, Maxim Oreshkin, who, at 38, formerly of France’s Credit Agricole, led a successful strategy to get foreign companies to buy Russian gas in rubles, rather than dollars or euros, to avoid sanctions.