The auction of a 75 percent state stake in oil company Slavneft that took place last Wednesday did not become the biggest privatization deal in Russian history. Representatives of the "Petersburgers," the group of politicians and officials close to President Vladimir Putin, were left without a chance in the auction. As a result, they are now well behind the "Family" in terms of financial and industrial resources, and they look unlikely to catch up any time soon.

It only took the auctioneer four minutes to strike the hammer three times, marking the winning bid of $1.8 billion. The stake went to Investoil, bidding on behalf of oil companies Sibneft and Tyumen Oil Co. (TNK). The auction failed to beat the privatization record set five years ago by the sale of Svyazinvest, which brought in $175,000 more.

Through a series of complicated maneuvers, the auction's organizers were able to achieve the seemingly unachievable and hold an ostensibly transparent process of open bidding while at the same time making sure the necessary candidate won. Analysts say that, of the seven participants in the auction, at least six represented the interests of Sibneft and TNK, and the outcome was clear before the bidding even began.

The last potential obstacles were cleared just hours before the auction went ahead. Chinese oil company CNPC recalled its bid, officially after a closer examination of the assets up for sale and, unofficially, out of "Oriental tact" and an unwillingness to get mixed up in local Russian rivalries. The auction's organizers themselves excluded several companies, including Financeprofit Expert, affiliated with Rosneft, a company that had battled genuinely hard to get its hands on Slavneft.

Rosneft, a state-owned oil company, is widely considered to be close to the "Petersburgers." It's no secret that, for the "Petersburgers," the only major resource is Putin himself. Without serious financial and economic resources, the "Petersburgers" are dropping further and further behind the "Family," the group of people who formed former President Boris Yeltsin's close entourage.

All the "Petersburgers'" attempts to extend their influence have been blocked by the "Family's" lobbying power. The exclusion of the Rosneft affiliate company from the Slavneft auction is a prime example. Government officials explain the exclusion, however, by saying that when one state company buys another, there is no benefit for the budget, as it amounts to just than shifting money from one pocket to another.

The "Petersburgers" did try hard, nevertheless. Rosneft's managers showed their hand, openly voicing their claims on Slavneft and making large hints that the auction's organizers acted in the winners' interests. Rosneft says the budget could have made a lot more money had the auction been fair, because Rosneft was willing to bid up to $2.5 billion.

But Rosneft's complaints could be the "Petersburgers'" undoing. A high-placed government source said it has long-since been obvious that no good comes out of letting state companies take part in the privatization of other state assets and that, if the Rosneft management really does have so much spare cash at its disposal, this could become grounds for an investigation into why it isn't investing the money in its own development instead of hiding it under the mattress.

Chubais on the offensive

Another major event that should have coincided with the Slavneft auction – the second reading in the Duma of the restructuring plan for the Unified Energy Systems (UES) electricity monopoly – has been put off until Monday. Unhappy with this postponement, Anatoly Chubais, the UES head, took the opportunity to go on the offensive at a forum on the energy sector in the 21st century at the Kremlin.

An irate Chubais confirmed the rumor that has been circulating for several weeks now that someone is buying up shares in UES and that, at this rate, they could manage to concentrate 20-25 percent of the UES shares in their hands. Chubais then accused those trying to postpone the reform plan of helping these "influential businessmen."

Chubais said the market went down 4 percent after the news that the Duma reading would be postponed, putting $30 million in net profit in the pockets of whoever was buying up the shares. Finally, Chubais called on the state to make up its mind about whether to follow reform through to the end or return to strict state regulation of the sector.

Chubais did not name the people buying up UES shares, but many think the trail leads back to Chukotka Gov. Roman Abramovich, considered one of the most influential members of the "Family." There are also rumors that Oleg Deripaska and one of the brothers Chernoi are also involved. This would be logical given that the aluminum sector is one of the most energy-intensive and, therefore, depends a great deal on the situation on the electricity market.

There is also a political logic at work: Deripaska is known to be close to Abramovich, while Abramovich and Chubais have had their differences of late over the influence of oligarchic groups in the country.

Chubais estimates the money the mysterious group is prepared to spend on consolidating a stake in UES at $600 million to $700 million, and gives this sum – equivalent to the annual budgets of several Russian regions – as evidence of how serious the oligarchs are now. The same day that Chubais said all this, the Slavneft auction took place, and, according to the Chamber of Auditors, the winners saved themselves the same sum. This makes the figures all add up, especially since, despite being a regional governor, Abramovich is still linked to Sibneft.

(Ekaterina Larina is assistant editor of The Russia Journal. E-mail Katya at katya@russiajournal.com.)