Soviet spirit, but with cash

Success: Russian oil giant Lukoil blends capitalism with job security and benefits evoking an earlier generation.

January 26, 2002|By Douglas Birch | Douglas Birch,SUN FOREIGN STAFF

USINSK, Russia - On the stage of the House of Culture, a 20-something couple in business attire raps to a karaoke beat, while a gang of other young professionals gyrates around them. "Lukoil is reliable and stable!" a blond oil specialist shouts into her microphone.

"Lukoil has the biggest tanker fleet in Russia!" declares Dmitri Nikolayev, a mining engineer.

"One hundred twenty million rubles went to social programs in the past year!" his partner proclaims.

Not so long ago, these ambitious university graduates in this remote oil town on the edge of the Arctic Circle would have been singing the praises of the Communist Party during their holiday bash. Instead, they were publicly declaring their love of their new capitalist bosses - precisely the people their parents would have been expected to despise.

It's not that Lukoil's latest crop of engineers and economists are dewy-eyed idealists. After the performance, Nikolayev explained what he really likes about Lukoil. "First of all, I have a job," he said. "And the salary is good, and it's paid on time. Also, I expect to get an apartment."

But the company, which produces one-fifth of all Russian oil, seems to expect an unswerving loyalty reminiscent of what Communist ideology once demanded. Russians, in turn, seem to want their employers to provide the kind of job security and social benefits that the state used to offer.

Lukoil President Vagit Alekperov, estimated by Fortune magazine to have a personal fortune of $1.3 billion, says he considers Lukoil's 90,000 employees as members of a big family. That family is expanding, with Lukoil purchasing Getty Petroleum of Jericho, N.Y., for $71 million last January - giving it operating rights to 1,300 gas stations in the United States.

And Alekperov probably won't stop there. He boasts that Lukoil will one day buy Exxon, and become the world's biggest oil company.

The question is, what might the world expect from Lukoil?

When the company roared into Usinsk two years ago, the town of 60,000 was desperately poor and demoralized. Eager to exploit rising petroleum prices, Lukoil poured money into operations - exploring for new oil deposits, repairing broken-down equipment and tripling the local work force. And it seemed determined to make Usinsk a company town.

First came a Lukoil service station, its red-and-white sign blazing in the sable sub-Arctic night. Then came Lukoil's corporate offices, its lobby furnished with leather couches, marble floors and a gushing fountain.

The company built Children's City, a lavish playground that features a mothballed jet plane and transport helicopter, both outfitted with rows of computers. It bankrolled the reconstruction of the town's Orthodox church and its mosque, cleared land for a new municipal park, built a bus station and started work on a 50-room luxury hotel. It runs an orphanage here and is constructing housing for its workers.

Company executives call their approach a "social partnership" with employees and the residents of the 30 regions of Russia where Lukoil operates. And they acknowledge that they are trying, to some extent, to replace some of the benefits workers lost after the fall of the Soviet Union. "Lukoil," says Vladimir Mulyak, first vice president of Lukoil's local subsidiary, "preserves the best traditions of the Soviet oil school."

Critics say Lukoil has also preserved some of the worst aspects of the Soviet era. Oganes Targulan, special project coordinator of Greenpeace in Russia, says that when his group visited the town last year to survey Lukoil sites, they were kept under surveillance and barred from visiting the sites with the worst environmental damage.

When the group tried to arrange a follow-up visit this summer, Targulan found his reservation at the town's only hotel mysteriously canceled. He suspects that word of his visit leaked to Lukoil. "It's like the Soviet times, with KGB following you everywhere," he says.

Lukoil didn't hire local oil industry veterans to top positions - they had, after all, presided over the near death of the local oil industry in the 1990s, as well as a 1994 oil pipeline spill that dwarfed the 1989 Exxon Valdez disaster. Native Usinskites also grumble that Lukoil officials, most of whom migrated from the company's home turf in western Siberia, are taking over local government.

To win over suspicious residents, Lukoil established a small media empire - including a radio station and a company-owned weekly newspaper, Northern News. In the next few months, it hopes to create the area's first local television station. Its main aim, company officials say, is to spread its corporate message - that what's good for Lukoil is good for the Usinsk region. "We wanted to promote the image of the company," said Yuri Pochtamtsev, the public relations executive who doubles as editor of Northern News.

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