Igor Sechin, the executive chairman of Rosneft has sparked scandal after scandal recently. In September, his lawsuit resulted in a court ruling to destroy all copies of the already released and distributed Vedomosti issue which contained a story about the alleged construction of dacha by the head of the state-owned company in Barvikha. Later that same month, Rosneft demanded that RBC pay a record sum of 3.12 billion rubles in compensation for the reputational damage caused by one of its publications. At the same time, Sechin literally sneaked the decision to sell Bashneft to Rosneft past the entire “vertical” of power. Finally, the head of Rosneft announced that his company was not going to reduce oil production despite Putin’s promise to cut it should such an agreement to do so be reached with OPEC. One gets the impression that Sechin has suddenly been given carte blanche in terms of expansion although, most recently, he has suffered an observable drop in influence.

Perhaps no other figure close to Vladimir Putin has stirred emotions like Igor Sechin has; he has been referred to as the Russian Darth Vader, a gray eminence and the all-powerful and almighty player standing behind the president. Moreover, his stock is still relatively high, which is at odds with last year’s tendency to remove Putin’s powerful “friends” from the latter’s entourage. Comrades of the head of the state are being replaced by technical executives – Putin finds it easier and more comfortable to deal with them. The young and apolitical Anton Vaino replaced “heavyweight” Sergey Ivanov whereas the unobtrusive FSB general Vladimir Bulavin replaced Andrey Belyaninov – Putin’s fellow during his GDR days. Wing man Yevgeny Murov was replaced by the until recently, still a colonel, Dmitry Kochnev. An earlier example is the dismissal of Vladimir Yakunin in 2015. There are at least two reasons behind these changes. The first stems from the sharp increase in the entourage’s demand for protection and resources under conditions in which the head of the state was absorbed with issues totally different in scale: Syria and Ukraine. In Putin’s eyes, statist interests have been supplanted by corporate interests which was permitted under the regime’s construction but is no longer at a time when the country finds itself amidst a geopolitical crisis. The second reason concerns plummeting resources: the budget deficit, low oil prices, the sharp decline in living standards, the necessity to make unpopular social decisions and to implement austerity measures. The budgetary pie is now low-calorie, as former Minister of Finance Aleksey Kudrin recently admitted.

Putin is starting to distance himself from those who are unable to resolve their problems independently (poor performance and proneness to conflict). He is also moving away from those who asked for too much money, evidently counting on their special, privileged status among the Russian elite. Those who have known the president for a long time and believe they are at the heart of his team previously believed they were “privileged”. Besides, the majority of Putin’s famous “friends” have been subjected to sanctions, which has in their opinion, probably expanded their moral (and political) rights to appeal for increased assistance from the president.

Sechin has turned out to be an entirely unique exemplar in Putin’s entourage. In the beginning, similarly to the majority of the head of the state’s close associates, he also demanded special state patronage given the crisis; lowering of taxation, reduction in the level of dividends, reform of Gazprom (access to gas export routes) etc. Sechin started to lose ground as did many of Putin’s close associates which was most vividly demonstrated by the removal of his people  from the company’s Board and the appointment of Andrey Belousov as the chairman of the board. The Kremlin also denied Sechin assistance courtesy of the Russian National Wealth Fund. By the way, one should not forget that since the flotation of Rosneft in late 2014, the Kremlin has repeatedly reminded the head of Rosneft of the negative effect this has on the ruble.

Perhaps, akin to some of Putin’s other friends and comrades, Sechin could be amongst those in danger of losing their post, of ceding his position to a more technical manager. However, Sechin has begun to make a recovery with his stock having risen over the last couple of months.

Perhaps, the main difference between the head of Rosneft and those of his ilk in the president’s entourage is that the former’s company controls vast resources that the country in general, and the federal budget in particular, need. Igor Sechin suggested a very simple and attractive solution to Vladimir Putin: Rosneft purchases Bashneft at a capped price not exceeding 330 billion rubles and then buys 19.5% of its own shares from Rosneftegaz for 700 billion rubles. In total, the company should raise more than 1 trillion rubles in the nearest future, a trillion rubles that is critically important for the budget. Suffice it to say that according to the recently amended 2016 budget law of the Russian Federation, the budget deficit will increase by 674.2 billion rubles to 3.034 trillion rubles (3.7% of GDP). Thus, it is clear that Rosneft’s money constitutes an important contribution towards the stabilization of Russia’s budgetary predicament (still, how the state will obtain this money is a different story since Rosneft will pay Rosneftegaz and not the state for its shares; the state will need to execute a payment of dividends).

Rosneft does have money (although the fact that it also has huge debts is often overlooked) and this is its main advantage from the state’s point of view. Rosneft’s account balance read 22.3 billion dollars in the first half of this year. It could raise somewhere in the region of 4 billion dollars additionally through the sale of shares in Vankorneft and Taas-Yuryakh, according to a report by Vedomosti. Rosneft has to repay 4.7 billion dollars by the end of the year. Hence, it will still have in excess of 21 billion dollars. In dollar terms, Rosneft owes approximately 19 billion dollars for the purchase of Bashneft and 19.5% of its own shares. That being said, it remains unclear whether Rosneft plans to borrow.

The scheme submitted to Putin, which offers a quick and easy solution to the budget deficit, is unlikely to prompt too many questions from the head of the state: Where is Sechin’s money coming from and how is he going to pay it back? What is Rosneftegaz’s dividend policy? What are the state’s guarantees with respect to obtaining funds for a package of Rosneft’s shares? Yet, these factors are somewhat irrelevant as the political decision has already been made and Sechin’s proposal has already been approved.

The political statuses of both Rosneft and Sechin personally have changed dramatically. Sechin, who was once a panhandler, has become a budgetary savior, second to none. Who would dare bad mouth Rosneft or its ambitions? Sechin is in a position to leave it to his opponents to come up with ideas about how to pay pensions, remunerate public sector workers, finance state defense procurement or other key institutions. Not only does Sechin acquire assets, he purchases budgetary insurance. However, a caveat exists in that such a role can be played only once.

The special role played by Sechin in Putin’s eyes definitely bodes well for the expansion of his unofficial boundaries of the permissible. Sechin was given the green light to recruit the general of the Federal Security Service (FSB) whose reputation raised many questions, to put it mildly (in fact, “Sechin’s FSB special forces” could have been disbanded entirely. He has been allowed to file the most absurd lawsuits against the largest and most influential Russian media outlets. Suffice it to pay attention to bashful explanations by Dmitry Peskov who found himself having to beguilingly interpret Igor Sechin’s statement in which he declared that his company had no intention of cutting oil production even if respective agreements were reached between OPEC countries.

All eyes are now on the Rosneft lawsuit with RBC. The latter is a multimedia holding which is being sued for over 3 billion rubles by Igor Sechin for reputational damage. Questions have immediately arisen: Is the intention behind this lawsuit to close the media outlet, gain control over it or apply pressure to journalists, forcing them to engage in exacting self-censorship? It was only recently, mind you, in spring of this year, that Mikhail Prokhorov, in charge of RBC, managed to fend off attacks by going as far as replacing his editorial staff. It was reported at the time that the head of the Russian Guards Viktor Zolotov was pulling the strings whereas RBC was unofficially accused of breaking the unspoken rules of the game; the media outlet regularly published pieces on Putin’s personal interests and those of members of his family. That is why this media outlet turned out to be, politically, most “attractive” – Rosneft can try out a new tactic of “educating” journalists starting with RBC. Is Sechin going to be given a longer leash than Zolotov was?

The head of Rosneft is, in fact, “buying” his new political status which will prove very difficult to maintain. For a start, the state has yet to fight for all of the financial resources earmarked for the budget as part of the two-step “privatization” process and herein lies the inherent basis for the future conflict. Secondly, Rosneft can offer its own political “contribution” to the stabilization of the budgetary situation only once as there would be nothing left of the company in the wake of two deals of this kind. Thirdly, having paid such a colossal price for Bashneft and Rosneft, Sechin will once again find himself in the role of panhandler. He will be petitioning for tax cuts or preferential loans or some kind of reform and/or benefits for his company. The new status will be short-lived; one will not be able to draw political dividends from it for long. And this means that Sechin has only a limited period of time to enjoy these privileges, having reinstalled himself in the Russian power elite and having earned (purchased) his new political license. An adjustment will start next along with a “downturn”. The fate of Putin’s Darth Vader will then be decided by oil prices and the state of the budgetary system which will have to be saved not through one-time cash injections, but through a solution having rather more long-lasting effects. The consequences of de facto nationalization have not been reflected upon by the government thus far and will only begin to affect Sechin.