OREANDA-NEWS. December 24, 2009. Maxim Barskiy was on his way from a three-week holiday in Australia flying via Tokyo with his family last autumn. Newspapers were offered to passengers aboard the plane. Barskiy took Vedomosti. He read that TNK-BP shareholders had decided not to appoint Denis Morozov, former Finance Director of Norilsk Nickel, to the position of Company President, and said to his wife: ‘You know, actually, I am well suited. I am their ideal candidate!’ On the following day, Maxim got a phone call from Ward Howell with an invitation to come for an interview about his potential employment with TNK-BP, reported the press-centre of TNK-BP.

‘It does happen in my life, — Barskiy says. – For instance, when I was on my way from America back to Russia after the crisis in 1998, I knew full surely that I would meet my future wife in Moscow, and she turned out to be just the one I imagined. So, this was yet another occasion when I knew they would call me in any case. This is not good luck, not bonanza, nothing of the kind. The key thing is to create an intention’.

We are having tea in the restaurant of Russobalt, a small hotel in Gogolevskiy Boulevard within a stone’s throw of TNK-BP office. Barskiy, 35, is with the company as Executive Vice President for half a year now.

The first thing he said in that interview with Ward Howell was actually the same: ‘I am the ideal candidate. Take a seat and jot down my reasons.’ When we ask the same question, he answers with no hesitation: ‘I am experienced in working with a foreign strategic investor. As the General Director of West Siberian Resources, I engaged a new shareholder, Repsol [of Spain], to my company and faced the same kind of issues as the Russian shareholders of TNK-BP faced with their British partners, i.e. the Spanish perceived us as their branch in Russia, and this had to be overcome. That is the first thing. The second thing is that I established an oil company [West Siberian Resources] in Russia, I built its business in the regions and maintained permanent contact with government authorities. In addition, it was a public company, so I am skilled at investor relations.’ ‘They said TNK-BP shareholders were looking for an independent director – a director who would serve the interests of the Company itself rather than those of any group. This was yet another aspect where I matched since I had never been related to any of the shareholders prior to my employment’, he adds. 

Sergey Vorobyov, President of Ward Howell, was skeptical about this self-advertising. Barskiy chuckles remembering Vorobyov asking questions from a huge list (‘did you read this management book? what about this one? but you don’t understand a thing in management, you won’t be able to run such a big business!’) and complaining that he had been looking for a successor to step into the shoes of Alfa Group’s chief oilman, German Khan, for as long as ten years, and to no avail. Barskiy had a meeting with Khan, Executive Director of TNK-BP, on the morning following the former’s birthday party. However, despite this aggravating circumstance and Vorobyov’s intimidations, Barskiy found common ground immediately with Khan and then with Mikhail Fridman, President of Alfa and Acting CEO of TNK-BP.

Following the decision of TNK-BP Board of Directors, Barskiy will take charge of the oil company instead of Fridman in one year. When we ask if he knows that they already nicknamed him ‘mini-Khan’ in TNK-BP, Barskiy changes countenance but for a split second only, and then laughs and says he is flattered by the comparison.

An own house in California
His father got a job as an accountant with Yuganskneftegaz in the mid—1980. He moved from Zhitomir to Nefteyugansk and took Maxim along. According to Barskiy, it was ‘the hard school of life’. ‘There are marshes around and the town itself stands on sand, so this sand in the eyes, in the nostrils, everywhere… It is minus 40 in winter and plus 40 in summer, and nothing to eat because the supply system was already bad in the second half of the 1980s. No mother. The atmosphere in the school was sort of… aggressive. They thought a stranger had come, a bright one, and showing off its intelligence. All in all, risk factors everywhere’, Barskiy tells.

On the other hand, Nefteyugansk had good school teachers, they could inflame, and Barskiy who preferred football and all sorts of pranks back in Zhitomir became an ‘A’ student in Nefteyugansk. Then, being 15 years old, he decided himself to go to Leningrad where his parents had earlier got their higher education. He started a real adult life by entering a light industry college and settling in a dormitory. Later on, he took classes with coaches and passed his entrance exams to study economics at the university. At the same time, he turned a penny working as accountant with various firms. However, Barskiy got bored by the second year at the university. Things that instructors were telling had nothing to do with real life. So he went to study at Berkeley University in California under a student exchange program.

‘In my life, Berkeley is second only to TNK-BP in terms of difficulty’, Barskiy confesses. The hardest thing was the language. Barskiy learned the language both in a specialized English-language school in Zhitomir and later with coaches, of course. But when he was given four chapters from a textbook to read for homework in his very first class with the American university, he only managed to read the first chapter with a dictionary by 2 AM. ‘I looked at the clock and could not understand how I was going to study.’

He decisively refused living on the university campus straight away: ‘They had some sort of double-bunk beds worse than in St-Pete’. Instead, Barskiy bought a house for about US200K. First, he took a loan from Yuganskneftegazbank where his father worked, and then refinanced the loan in a local Californian bank two months later. By that time, he added some extensions to the house for the bank to appreciate the building and give a bigger loan. Barskiy lived in one room and let three others using the rent to pay interest on the loan. ‘I would certainly not live in a house like that now but when I sold it to redeem my loan it turned out that its price grew by 50%’, he says.

Investment universities
In 1995, Barskiy graduated from Berkeley with an MBA degree. In 1996, he turned out to be the first Russian citizen to open a brokerage in the US. Barskiy says his company earned good money on hedging risks before the Asian financial crisis in spring 1997 by using put options (defending against price decline) for the key American stock indices. He actually wrote a degree paper in Saint-Petersburg University by that time justifying a close correlation between Dow Jones and Russian stock indicators adducing examples from his trading practice.

Barskiy tried to apply the same tactics again in late October 1997 when the crisis turned global. But things went bad that time: ‘The decline was so sharp, 20% in one day, that we were late to sell our options. We just could not get through to the exchange because the phone lines were overloaded. I understood I was not prepared to face it… Our losses did not amount to all the money we had earned before, of course, but we lost many clients.’ Many of those who stayed in the business suffered losses during the Russian crisis in autumn 1998. Barskiy’s brokerage in US ended at that point. He sold his firm and signed a confidentiality agreement with the buyer undertaking not even to mention its name in public.

On the other hand, two years of trading Russian Eurobonds and ADRs provided Barskiy with some good friends in the Moscow-based investment community. He immediately got a job with Troika Dialog that had used to be his trading partner and soon moved from the trading desk to the investment banking segment: ‘I often brought them all sorts of ideas for deals, so they ultimately said: listen, if you are so clever, don’t tell us your fairytales but start working!’ Barskiy got into the team of a renowned investment banker, Alan Apter, at the time of a deal between Vympelcom and Telenor of Norway that was purchasing a blocking stake in the Russian cell operator. ‘We sweated our guts out 20 hours a day but it was a very strong school’. Then he had to study in consulting projects because it was quite difficult with mergers and acquisitions on the Russian market in the early post-crisis years. In particular, Barskiy gave a hand in attracting capital to Soyuz, a record company, and ABBYY, a software company: ‘Western direct investment funds, especially those with government guarantees, did provide finance despite the crisis’.

One day, Troika hosted a visit from Cityline, a Saint-Petersburg internet provider, who was short of \\\\$10M to develop its business. Apter believed the client was too small for Troika. ‘But I am interested’, Barskiy said. He left Troika and found Dmitry Bosov as an investor for Cityline. (Boris Berezovskiy who also took part in funding the provider was invited by his son-in-law Egor Shuppe who had been Vice President of Cityline.) Cityline was sold to Golden Telecom for \\\\$29M in May 2000. The deal took place despite the fact that the global internet boom had already turned into an internet crash. ‘Golden Telecom just had no chance to develop further without Cityline. We were present in all major cities of Russia by that time and controlled the stock of allocated lines almost entirely’, Barskiy explains.

Later on, Barskiy established a direct investment fund, Salford (one of its investors was Badri Patarkatsishvili). He worked for the fund until 2002 and managed to invest around \\\\$100M. The best known investment was the purchase of Borjomi in Georgia but there were also investments in the Russian oil industry and real estate. According to Barskiy, ‘all of them were quite profitable but I ultimately had to say goodbye to the fund’. He does not want to go into the detail of that story just as in his short experience of managing Finartis, a fund owned by the family of former Deputy Prime Minister Nikolai Aksyonenko who fell in disgrace after his resignation. As a matter of fact, Barskiy sometimes makes an impression of a cautious person despite all of his impermeable assuredness.

‘What this industry is about’
By the time of going free, Barskiy had a capital of his own. He earned his first million dollars on the sale of his stake in Cityline and since then, as he says, ‘everything went all right, I did not lose but earned’. Therefore, it was necessary to utilize the money somewhere. For instance, Barskiy still owns a factory in the Leningrad region that uses sawdust to produce fuel for power plants to be exported to Northern Europe. ‘We are the Russia’s biggest exporter of these things’, Barskiy says (according to Barskiy, the plant revenue is less than US10M per annum). He also used to own a glass factory that is already sold. But his key investment ideas were oil and gas.

In 2004, Barskiy and Bosov became shareholders of Vostok Oil, an oil company registered in Bermudas. Its key asset was Vostochnaya Transnatsionalnaya Kompaniya (VTK) with licenses to produce oil in the Tomsk region, that was brought to the state of near-bankruptcy by its previous management. Barskiy was appointed as the General Director of Vostok Oil. VTK renamed as West Siberian Resources (WSR) began cutting costs and adding reserves industriously.

In 2005, WSR acquired Pechoraneft from Alexander Mamut for US 110M, and Pechoraneft won two greenfield auctions soon after the transaction. In 2006, Repsol of Spain purchased 10% of WSR shares for US 90M. In early 2008, WSR merged with Alliance Group owned by the Bazhaev family. Barskiy left the company in half a year after the merger. Within four years of his management, WSR capitalization increased fiftyfold, from US 60M to US 3B, and Barskiy himself learned to manage an oil production business.

First six months in WSR were difficult for the financier Barskiy. ‘Once they dropped a cable into a 3000 m deep well, and if we left it there, we would have had to kill the well that cost us US1.5M. Or some metering instrument crashed and blocked the oil inflow. And I do not know chalk from cheese in these things!’, he recollects.

All of the six months, Barskiy was persuading Vyacheslav Pershukov, YUKOS Production Vice President, to move to WSR (according to Barskiy, his father’s oil industry contacts have nothing to do with all this – he found Pershukov himself). Pershukov ultimately agreed and brought his team from YUKOS. ‘Pershukov is a unique specialist, a professor of physics. He would sit down at a table pen in his hand calculating and drawing charts on a piece of paper, which showed why the company I was going to buy had poor reserves. So, I figured out pretty quickly what this industry is about. It is about the quality of reserves’, Barskiy says while carefully moving the napkins we threw around back into the napkin holder.

Another ‘school of life’
It was prior to the deal with Alliance that a part of the management team moved from WSR to SN Invest, a gas business established by Bosov and Barskiy with ca. 170 Bcm in reserves (there is also Barschevskoe oil field with ca. 20 Mt in reserves). The partners offered Alliance owners to participate in the business but the Bazhaevs did not want to. Barskiy, in his turn, did not want to stay in WSR as a manager with the new owners.

He does not intend to integrate his own gas projects into TNK-BP because of a potential conflict of interest (and TNK-BP actually lays no claims to them). Barskiy is a minority holder in all of his side businesses. ‘So, 100% of my working time will belong to TNK-BP’, he says. He will assume his office in January 2011. Prior to that, he will take an annual internship with BP. The British company introduced this rule for its own top managers, and BP representatives insisted on giving the same ‘school of life’ to the future leader of their Russian joint venture. Barskiy is calm about this somewhat extended period of his appointment just as is he calm about the fact that this year the British found Pavel Skitovich, a candidate of their own to the position of TNK-BP President, and that the two candidates were in a state of forced competition for several months. ‘The most important thing is that there is a decision [on the appointment] taken by the TNK-BP Board of Directors’, he says with confidence.

Some time ago, Barskiy started out by sacking all foreign managers from WSR. They were typical ceremonial bystanders with huge financial claims and meager return for the company. He also faced another problem. If a company hires a western director for the special benefit of the international audience and entrusts operational control to a Russian, this misleads investors because each director explains the state of affairs in the company in his or her own manner. ‘This is why there should be one director for everyone in the companies that have foreign and Russian shareholders’, Barskiy concludes. ‘It is perhaps because of these views that you attracted TNK-BP?’, we ask. ‘Its Russian shareholders, in any case’, he replies in a half-joking manner.

Barskiy about his father
‘He is an enterprising person. He bought land plots in the Moscow region back in 1992 but the money for his deal travelled from Nefteyugansk to Moscow for two months, so the sellers already started seeking other buyers. My father kept visiting the bank, of course, to make inquiries about what was happening and once he asked them if it was so difficult to open a branch in Moscow to get the money there on the same day. They replied: well, if you are so clever, go and do it. Which is what he did – he established a branch of Yuganskneftebank in Moscow’

Barskiy on overworking
Barskiy still abstains from talking about what he would like to change in TNK-BP. But what he finds most difficult for himself after working in the investment business and for fast growing companies is multi-hour meetings. ‘Three to four hours without a break is very difficult. I never spent more than two hours for meetings myself.’

Future TNK-BP CEO has practiced Yoga 23 following Sidersky system and free diving (long dives without an aqualung) for six years. Some time ago he also started doing qigong and already paid a visit to Tianzhushan mountains. Yoga, qigong and meditations are his exercises for every morning: ‘They help me to withstand overwork. That is for sure.’

Source: Vedomosti