A Russian financial analyst criticized Rosneft for accruing debts and Gazprom for losing money to Putin’s friends. Now he’s out of a job.

Sberbank SIB fired one of its analysts for “gross ethical violations,” and then it fired his supervisor

On May 22, Sberbank CIB fired an analyst named Alex Fak after he authored a report criticizing executive decisions by the company Gazprom. The document, written with another Sberbank CIB analyst named Anna Kotelnikova, leaked to the media on May 21, though it was intended only for Sberbank CIB’s clients. In the report, the analysts argue that the chief beneficiaries of Gazprom’s export pipeline projects aren’t Gazprom’s shareholders but the contractors hired to build them, which happen to be companies controlled by some of Vladimir Putin’s closest friends.

On May 23, “upon mutual agreement of all parties,” Fak’s supervisor, Sberbank CIB Analytical Department Director Alexander Kudrin, also left the firm, where he’d worked since 2002.

According to Sberbank President German Gref, the firm dismissed Fak and Kudrin because they “broke the company’s internal regulations” and “committed gross ethical violations.” “[Fak] drew conclusions based on unverified, unconfirmed data, thereby misleading the market. Whether this was irresponsibility or a deliberate provocation, I can’t say. Our standards of professionalism don’t allow us to tolerate such unprofessional actions,” Gref explained on May 23.

Neither Fak nor Kudrin are speaking to the media about their ouster. According to his LinkedIn page, Alex Fak has works as an analyst since 2006. Before joining Sberbank CIB in 2008, he was a financial columnist for The Financial Times and Reuters. In 2016, Sberbank CIB’s press service announced that Fak was voted Russia’s leading research analyst in that year’s Extel Pan-Europe Survey.

The Sberbank CIB report predicted that Gazprom’s pipeline projects will lose lots of money

In their report, Fak and Kotelnikova studied the construction of the export gas pipelines the “Power of Siberia” (to China), the “Nord Stream 2” (to Europe, along the bottom of the Baltic Sea), and “TurkStream” (also to Europe, along the bottom of the Black Sea). The analysts found that the “Power of Siberia” will cost $55.4 billion, which is more than Gazprom can recover in export sales to China, leading to an estimated $11 billion in losses, say Fak and Kotelnikova.

The analysts argue that an alternative pipeline to China called “Altai” would have cost Gazprom at least five times less money than the “Power of Siberia.” Fak and Kotelnikova speculate that the company went with the more expensive option because it was favored by its two biggest contractors: Stroygazmontazh and Stroytransneftegaz, which divided up “almost equally” the main contracts to build the pipeline. The former company belongs to Arkady Rotenberg, and half of the latter is owned by Gennady Timchenko and his family. Both these men are considered to be key figures in Vladimir Putin’s inner circle. Additionally, another contract in the pipeline project went to a company called Sibur, which partly belongs to Timchenko.

Fak and Kotelnikova reached similar conclusions about “Nord Stream 2” and “TurkStream,” finding that the first pipeline will cost Gazprom $21 billion and won’t become profitable for at least 50 years, while the second project will cost $17 billion and won’t pay for itself for two decades. The Sberbank CIB analysts estimate that Gazprom will lose $17 billion because of these pipeline projects.

Gazprom has not commented on the report.

Last fall, Sberbank CIB analysts criticized Rosneft CEO Igor Sechin

Alex Fak doesn’t exactly hog the limelight as a financial analyst, but his work on spending by state companies in Russia’s oil and gas industry has grabbed news headlines before. In May 2017, for example, the finance website Finanz.ru cited Fak in a story about Rosneft spending more than it earned for the third straight quarter, “burning its cash reserves in banks and raising its debt burden.”

The Russian media turned its attention to Fak again in October 2017, when journalists got their hands on another report meant only for Sberbank CIB’s clients, where Fak, Kotelnikova, and another analyst named Valery Nesterov looked at Rosneft. One of the report’s subsections was titled “We Need to Talk About Igor,” referring to Rosneft’s politically powerful CEO, Igor Sechin.

The report’s authors wrote that Rosneft was expected to reduce its debt after acquiring control of TNK-BP in 2013 — especially when oil prices crashed in late 2014. Instead, the report states, Rosneft spent $22 billion on new acquisitions “without any clear focus.”

When Sberbank CIB’s report hit the news, Rosneft accused the authors of “going beyond their expertise” and crossing into “personal attacks and geopolitics.” Spokespeople for the oil company even suggested that the analysts might be “borderline mentally ill.”

Shortly after the report leaked to the media and caused the scandal, Sberbank CIB annulled it, apologized to Rosneft, and sent clients a revised copy that redacted some of the passages about Sechin. For example, the line “The problem is that organic growth will be too slow to satisfy the CEO’s ambitions” was changed to read “the company’s ambitions.”