“Bashkiria is involved in the management of Bashneft purely nominally”

What has the republic received in 5 years from Putin's “gift” in the form of a quarter of the company's shares?

“Bashkiria is involved in the management of Bashneft purely nominally”
Photo: Timur Rakhmatullin

Despite a significant stake in Bashneft, the leadership of Bashkiria does not have much influence on the most important decisions in the oil company. Moreover, the region's oil dependence bears certain risks, economist from Ufa Rustem Shayakhmetov believes. He wrote about this in his author's column for Realnoe Vremya. Russia's President Vladimir Putin, after the request of head of Bashkortostan Rustem Khamitov, 5 years ago signed a decree on the transfer of ownership of the republic of 25 per cent of the shares of Bashneft Joint-Stock Oil Company. The oil company was included in the list of strategic enterprises of the Russian Federation at that time. More than half of the company's assets, which at that time remained with Rosimushchestvo, were later transferred to Rosneft.

Largest taxpayer

Bashneft Joint-Stock Oil Company PJSC is the backbone of the economy of Bashkortostan. It is the largest taxpayer in the republic, the company's tax deductions to the budget of Bashkiria in 2019 exceeded 23 billion rubles, and in 2018 the taxes to the republican budget amounted to 42 billion rubles. The share of tax revenues of Bashneft in the budget of the Republic of Bashkortostan in 2018 was 27,9%.

The company employs more than 30,000 people. Bashneft's revenue in 2019 compared to 2018 decreased by 7% and amounted to 703 billion rubles. The decline in revenues was due to the fall in world oil prices last year (9,2%) and a decline in oil production (2,6%).

Five years ago, 25% of the shares of Bashneft were transferred to the Republic of Bashkortostan, which made it possible to receive additional income. Over 5 years, about 35 billion rubles of dividends were transferred to the republican budget. Although formally Bashkiria has the ability to influence the management of the company, but taking into account that Bashneft is a subsidiary of Rosneft, the republic's participation in the management of the company is purely nominal.

Bashneft annually allocates about 4 billion rubles to social projects. Last year, the company financed 116 social and infrastructure projects in 26 municipalities of Bashkiria. This activity is an important contribution to the development of the republic.

Risks for the region

The socio-economic development of Bashkortostan is largely determined by the results of the oil and gas complex, and primarily by Bashneft. In the 1990s, the oil and gas industry formed the republic's leading position in Russia and its relative prosperity in comparison with other Russian regions. It should be noted that at a time when the importance of oil and gas in the world economy decreases, the role of the oil and gas complex in the national economy increases. Besides, such a significant dominance of one organization in the economy of the region carries high risks for development, since in the event of a crisis in the oil and gas sector, the republic will not be able to make up for the resulting revenues, including the budget sphere.

As a result, actions are needed to diversify the economy. At present, taking into account the ongoing changes in the world economy and while maintaining the existing potential, it is necessary to accelerate the development of industries, primarily related to biotechnologies, information and communication services. Otherwise, our economy will continue to lag behind the leaders.

Our fathers and grandfathers in the past created a powerful oil and gas complex, at that time it was an innovative development. But the world has changed and we need to choose new priorities in development. It is very good that Bashneft brings in hundreds of billions of rubles, but we need new sectors of the economy that will shape our successful future. Now the US produces more oil and gas than Russia, but the US leadership in the world economy is formed by other industries. Their innovative development determines the future of the world, unfortunately, we can not now boast it. Everything in the world is changing, and now China is gradually becoming a world leader, which is not true of Russia.

It is very important to be proud of the great past, but now we need to create a successful future.

By Rustem Shayakhmetov
Analytics Bashkortostan