Viktor Ilyushin: Coordinator

May 26, 2011, the interview was taken by Sergey Pravosudov
Published in corporate Gazprom Magazine Issue 5

Viktor Ilyushin, Member of the Gazprom Management Committee, Head of the Department for Relations with the Russian Federation Authorities answers questions posed by the Gazprom Magazine.

Mr. Ilyushin, what was the reason for reorganizing the Department for Relations with Regional Authorities of the Russian Federation into the Department for Relations with the Russian Federation Authorities?

A similar structure already existed in Gazprom between 1997 and 1998 also comprising a PR and Media Relations Service. The conditions were changing along with the structure.

The regions brought their legislation in line with the federal legislation. But the constituents still have some legislative peculiarities. Current reorganization is driven by the changes in regional powers many of which were transferred to the municipal entities, thus Gazprom has to coordinate interaction with authorities at all levels to implement large-scale projects.

Visit by Russian regional heads to Gazprom’s production facilities, 2011
Visit by Russian regional heads to Gazprom’s production facilities, 2011

Visit by Russian regional heads to Gazprom’s production facilities, 2011

New structure

The new Department comprised the Directorate for Relations with the Federal Assembly and a new Division for Interaction with Legislative Authorities of the Russian Federation. Thus, we will cooperate with legislative authorities at all levels: federal, regional and municipal. Our experts will develop common rules of conduct for the subsidiaries of Gazprom.

How come there is no special structure for interaction with the Government and the Administration of the Russian Federation President? It is no secret that these bodies form the ideology of numerous draft laws.

Many things depend on the common practice. One should share a language with experts and in our case they can hardly be replaced. We don’t have such a separate structure indeed, but this is not to say that Gazprom has no interaction with the Government and the Administration of the President. In case of the special issues the interaction is carried out directly with the relevant departments and ministries using no intermediaries. For instance, financial and economic experts of Gazprom interact with the Ministry of Finance and the Federal Tariff Service, production experts – with the representatives from the Ministry of Industry and Energy, and the Ministry of Natural Resources, etc. while our department is mainly focused on the decision-making process. Every year Gazprom’s experts take part in introduction of up to 100 amendments into bills and effective laws.

The Department for Relations with Regional Authorities is focused on interaction with the executive bodies of the federal constituents. We perceived the lack of legislative cooperation in the regions. I will remind that in the late 1990s Gazprom interacted with 50 regions – Agreements of Cooperation were signed. Now their number exceeds 80 as Gazprom penetrates Eastern Siberia and the Far East. At the same time, the number of personnel in the Department remained almost the same. We are trying to move ahead in order to ensure a favorable legal framework by the moment Gazprom starts implementing a project in the region. The need to unify the legal framework of the federal constituents made us focus on these issues. This work has always been performed on the federal level. We are now deepening the cooperation with the federal constituents and local governments.

Did the transfer from the election of governors to their appointment make your activity more complicated or easier?

Its hard to give and unambiguous answer to your question. The Government has a controlling stake in Gazprom and, therefore, governors understand perfectly well that we implement the projects approved by the heads of state. But we would like to see more governors with the experience in running economic entities. In this case it would be easier for us to work with the governors. I don’t mean their level is low, but it could be higher.

Visit by Russian regional heads to Gazprom’s production facilities, 2011
Visit by Russian regional heads to Gazprom’s production facilities, 2011

Visit by Russian regional heads to Gazprom’s production facilities, 2011

Regional interaction

It is no secret that the governors became less independent after introduction of the appointment procedure. I can give a simple example. We arrange visits of the regional heads to Gazprom’s facilities in YaNAO on a regular basis to show them the extreme conditions of gas production and what happens when we come to regions. Some 7 to 8 years ago only 12 governors of the entire list didn’t visit Gazprom’s fields while now this number is nearing to half of the list. Our efforts to invite heads to the North with its immense gas reserves don’t yield the desired feedback. But the times are somewhat different now.

Appointment of Dmitry Kobylkin, head of NOVATEK, as the YaNAO Governor hit the headlines and was regarded as Gazprom’s failure. Do you share this opinion?

I strongly disagree. I don’t know any people who believe that the appointment of Mr. Kobylkin is a failure of Gazprom. We maintain constructive cooperation and there is no other way. Considering the role played by Gazprom in this region, I would say that we have no other option but for close interaction. The YaNAO head knows Gazprom well enough and we interact quite efficiently.

Did you manage to arrange coordination of the effort by the Company’s structural units in the regions?

We are not trying to unify everyone in this case. In different regions Gazprom’s structural units chose the forms of cooperation themselves. It is clear that they have to coordinate their production and social policy. Talking about the positive experience of the activity coordination among the Company’s structural units I would like to mention as an example the Nizhny Novgorod, Kaliningrad and Orenburg Oblasts, the Krasnodar Krai, the Republic of Sakha (Yakutia), YaNAO, KhMAO. This list may be extended.

I can’t remember a single region where we can’t find a common ground with the local authorities. Problems exist of course, life is life. There is no secret that some governors try to get as much as they can from every subsidiary of Gazprom while our task is to equal their hopes from one side and to minimize the expenses from the other.

Our subsidiaries create corporate associations in federal constituents on a voluntary basis retaining the economic independence of course. We support the participation of Gazprom’s representatives in the activity of the regional and local legislative bodies. 70 employees of our Company are deputies of the legislative assemblies in federal constituents, over 20 – in regional centers and over 1.2 thousand – in municipal bodies. This is not enough. We will promote our colleagues. The employees of Gazprom are highly reputable. The changes in the electoral system don’t make our tasks easier but we will go on.

Did the institution of Gazprom’s representatives in the regions prove its value?

It is relevant for some regions such as Sakhalin for instance. We have come there a while ago. It is very difficult to interact with this region due to a huge time lag, therefore, we have set up a representative office there that assumed the resolution of the bulk of operational issues. The representative office in Sakhalin may extend its territorial functions in the future. Time will show.

At the same time, there is no special representative office in the YaNAO yet. It was there before. For some reasons the representative functions had to be reallocated among subsidiary companies. This region has its own traditions. We regularly discuss the need and opportunities for setting up our representative offices in the Federal Okrugs.

Currently we consider an opportunity for setting up a representative office in Yakutia which is driven by the implementation of the Eastern Gas Program. Representatives of Gazprom stay in Yakutia on a regular basis, but we haven’t made up our mind yet whether to set an official representative office there or not.

There is no representative office in the Republic of Gorny Altai as well. But it can be set up since the Altai gas pipeline may cross this territory. Prospects will determine our actions.

Visit by Russian regional heads to Gazprom’s production facilities, 2011
Visit by Russian regional heads to Gazprom’s production facilities, 2011

Visit by Russian regional heads to Gazprom’s production facilities, 2011


What draft laws are to be supported by Gazprom in the State Duma? Why the draft Law on Alternative Motor Fuels has been gathering dust in the State Duma for 10 years now?

I don’t have enough information on this issue and wouldn’t like to give any estimates. I have no doubts in the need to adopt this law since we are obviously interested in promoting natural gas as a motor fuel.

But if this law has been shelved in the State Duma for ten years it must have strong opponents and we know the examples when the needed draft law is adopted almost on the fly.

But one should also take a look at the objective reasons. New types of motor fuels have rapidly been developing worldwide lately. Now they include not only compressed natural gas, but also various mixtures, biofuel and GTL fuel. It is clear that the law must cover all motor fuels but this is not a reason for delaying its adoption for another couple of years.

I would like to dwell on a law which is essential for our industry and it concerns the responsibility of the owners for the results of the economic activity carried out by the lessees in the housing and utility sector. A simple scheme is applied in many regions now. A boiler house is taken on a lease by a private company that sells heat to consumers but doesn’t pay for gas. After some time this company becomes bankrupt and another one takes its place and it all happens again. We witnessed three-four lessees changing in the Volgograd Oblast. The similar situation is in the Tver Oblast and in more than 10 other regions. As a result, Gazprom loses billions of rubles since it can’t recover debts. It is necessary to cover the breach in the law on a federal level.

What do you think of a transfer to the equally profitable prices in 2015 instead of 2011?

It is obvious that as an employee of Gazprom I am interested in reaching the equally profitable domestic and export prices as soon as possible. From the other side, our Company sells gas at the prices set by the state. We understand perfectly well that the state is trying to preserve social stability and therefore our Company tries to evade such unpopular steps as a sharp rise in gas prices. But Gazprom has to develop new fields and build gas pipelines, which requires money, otherwise the implementation of the economically and socially significant projects may slow down.

Is the idea of the Ministry of Finance to increase the severance tax rate reasonable?

I am not a tax expert but if I am not mistaken, it was initially supposed to invest the severance tax proceeds in the geological survey i.e. in the resource base replenishment. But we didn’t go ahead in this area to my mind. Taxes mean a mainstream policy and I am not a politician. The state is entitled to impose taxes. But I would like this process to be clear for everybody, sound and fair.

What role does your Department play in implementing the largest projects of Gazprom?

Having no direct relationship to the production process we actively contribute to the corporate projects implementation. First of all, this refers to land allocation, obtaining permits for passing and transporting cargoes, rehabilitation of lands and roads, property relations regulation, etc. Therefore, we actively interact with regional and local authorities. It is by no means easy.

I can give a simple example. Gazprom couldn’t initiate the Sakhalin – Khabarovsk – Vladivostok gas pipeline construction for a long time as some local heads were trying to get certain preferences. We managed to strike a compromise and the trunkline is to be commissioned this year.

Visit by Russian regional heads to Gazprom’s production facilities, 2011
Visit by Russian regional heads to Gazprom’s production facilities, 2011

Visit by Russian regional heads to Gazprom’s production facilities, 2011


But, having understood that the activities are to be accomplished soon, a number of heads tried to take advantage of the situation again and impose additional obligations on Gazprom. Viktor Ishaev, the Presidential Plenipotentiary Envoy to the Far Eastern Federal Okrug helped us a lot in solving this problem. He gathered all the regional heads whose territory is crossed by the gas pipeline and demanded that they do not to interfere with Gazprom’s project needed by the state.

There are a lot of agencies engaged in lobbyism in the USA but they don’t exist in Russia. Why?

The absence of numerous lobby agencies in Russia doesn’t mean that we have no lobbyism. Back in the early 1990s Russia considered the idea of legalizing the lobbyism. The experience of the USA and Europe shows that if this process is put into a clear legislative framework, it reduces the corruption ability in the relationship of business and authorities.

Once I attended a meeting with a president of a certain country where he was asked, “What is the price of adopting one law?” And he gave the exact amount. It is big money, millions of dollars. Then he disclosed the details comprising service payments for experts, lawyers, economists and other experts who prepare the draft law; resources for financing public hearings of the draft law and public opinion polls. Specialized structures take care of that and the process is regulated by the appropriate laws. Europe and the USA have a long-standing experience.

There is no official lobbyism in our country. The attempts have been made to adopt the law. As far as I know, there are alternative draft laws. Meanwhile, the lawmaking process develops according to its own rules. Russian citizens don’t know a lot about the details, which is bad to my mind.

It is probable that the absence of this law is driven by the fear to make a mistake. But dragging out this process only deepens the problem and often leads to growing corruption when adopting the laws. This law has to be adopted sooner or later.

During the era of the USSR you made a successful career in the All-Union Leninist Young Communist League and the Communist Party of the Soviet Union, in the 1990s you took the post of the First Assistant to the Russian Federation President. Did you manage to arrange a personnel recruitment system?

It would be immodest to give an affirmative answer to this question. One can’t do it alone, all the more within a short period of time. It takes dozens of years and centuries to create such a system. We shouldn’t forget who is in the center and what it is aimed at. We all come from our past. The question is how to take this into account and use it in the future life.

Many generations were disciplined by adversity in the All-Union Leninist Young Communist League and the Communist Party of the Soviet Union. There is no bad experience. I had good teachers. I learned how to work with people from them. Many immigrants from the former USSR could find their place in modern Russia. There is no other way. People can’t be replaced in the country.

Huge experience in reorganization and human relations was obtained in the early 1990s. Not everything got well. We were moving on by trials and errors. People, traditions, lifestyle, economy and political order are delicate matters. One can’t change them in one day. Flings are impermissible here. But we wanted to do everything fast and sincerely. Not every thing came out at once.

I would like to share my views on personnel management. The bulk of the problems with forming a vertical power structure in our country are driven by the fact that many leaders who occupy certain post do not know the history of our country well enough and the problem they are going to tackle. Moreover, they are trying to initiate work turning over a new leaf giving no consideration to the previous experience. And it doesn’t matter what region you are from and what institute you have graduated from.

Formula of success

As a result, we lose much time and make a lot of mistakes. There is no doubt that eventually a clear system for personnel recruitment, management and training will emerge in Russia.

What is your personal formula of success?

Back in the USSR I came across a book by Dale Carnegie “How to Win Friends and Influence People”, and it produced great impression on me and my numerous contemporaries. We read this brochure to tatters.

Today, there is a book titled “A Way Up to Career Top, Power and Wealth” by Valery Chichkanov, a friend of mine, is on my table. I often refer to it and find a lot of useful things. Briefly, one should love his work, love people and beaver away. Success may come then.

What do you like to do in leisure time?

I have a lot of passions but my grandchildren are above all, I have five of them. I do sports: go downhill skiing, and recently I have taken fancy of golf. I have always been with a photo camera for half a century now. I have a lot of passions but too little leisure time.