This is an article from Menas Associates’ monthly Caspian Focus publication.

President Gurbanguly Berdymukhamedov received an unusual guest — the Russian businessman Igor Makarov — on 2 June. The latter is currently the CEO of Areti Group, a diversified holding company and the successor of Itera Group.  Makarov’s lack of imagination is striking, as Areti is just Itera spelt backwards!

The presidency issued a brief statement following their meeting in Ashgabat. Itera is reportedly interested in implementing a host of new projects in the country involving oil and gas, chemical engineering, real estate development and direct equity investments. The official website of Areti Group does not disclose the areas in which the company operates and lists its HQ as being located in a non-descript Moscow business centre.

A little Makarov History

Igor Makarov is of Russian origin but was born in 1962 in Ashgabat. In 1983 he graduated from Turkmen State University and was a member of the Soviet cycling team for six years, between 1981 and 1985. He founded an ‘international group of companies’, or just MGK in Russian, called Itera, in 1992. It was the largest private company in Russia for most of the 1990s and specialised in the production and sale of natural gas. In the late 1990s and early 2000s, Makarov worked his way into corruption-prone Ukrainian gas politics and sold Turkmen gas to Kiev via Russia by capitalising on his excellent connections in all three countries.

In 2012, Itera won the national title of ‘the best company of the year’ in Russia after achieving a historic annual production level at its fields, of 265 bcm. The volume of gas sold from its own resources and from those of partner firms reached a record 600 bcm. Yet, that same year Makarov decided to sell 51% of his business to state-owned Rosneft headed by President Vladimir Putin’s close associate, Igor Sechin. At the time Rosneft was seeking to challenge Gazprom’s monopoly in the gas sphere by creating a stand-alone division within its corporate structure to produce, commercialise and export natural gas alongside Gazprom.

Uncertain future

While it is unclear to what end Areti was created in 2015, the Russian media reported last December that Igor Makarov was planning to acquire a 50% stake in a closely held company called Gazoil. It owns a chain of 80 gas stations in Siberia and is a minority shareholder of several gas distribution entities in the wider region. At the time of the announcement, the whole of Gazoil’s shareholder capital was owned by a local entrepreneur called Evgeni Vdovin. According to media reports, Areti was first going to conduct due diligence before deciding whether or not to buy half of the Siberian gas operator. No other information has been disclosed since then and Russian business records identify Vdovin as the only owner.

Another big mystery surrounding Areti’s operations concerns Turkmenistan. In 2009, the then MGK Itera was awarded a contract for Block 21 off the Caspian coast comprising two separate structures, South and West Erdekli. Their total proven reserves were estimated at 800 bcm of natural gas and 95.5 million tonnes of liquid hydrocarbons. Logically, after the acquisition of Itera by Rosneft, the latter should have become the operator of the block, which has yet to bear fruit. In support of this, Rosneft’s list of affiliated companies, updated as of June 2013 when it bought out the remaining 49% of Itera, saw an additional company called Rosneft Turkmenistan. The likely purpose of this Cyprus-registered entity was to take Block 21 under Rosneft’s corporate wing.

Building relationships

Igor Makarov remains in many respects a mysterious figure. Unlike the majority of Russian executives, he succeeded in maintaining a close working relationship first with Saparmurat Niyazov and, years later, with Gurbanguly Berdymukhamedov. A US diplomatic cable from October 2008 revealed that Itera had bought a €60 million yacht for the Turkmen president just as negotiations were starting over the fate of Block 21.

For many years Makarov employed another prominent Turkmenistan-born Russian, Valery Otchertsov, as Itera’s first vice president. He was the deputy speaker of the Turkmen parliament from 1989 to 1991 and minister of economy and finance until 1996. Otchertsov had certainly played a role in developing Itera’s local business thanks to his friendship with Niyazov. Both men quickly became invaluable intermediaries in the Russian-Turkmen gas partnership.

To please the equally capricious Berdymukhamedov, Itera subsequently invested a few million dollars in the construction of a luxury hotel in the Awaza tourist area on the Caspian Sea. This is where the Turkmen Oil and Gas Ministry held the most recent international gas congress in May 2016. The destination is hard to reach, in particular for Western delegates, because they first need to go to Moscow to take a flight for Ashgabat. A ride from Ashgabat to the resort takes another hour.

There is a possibility that Areti could launch a second development project in Awaza: the government knows that, for most of the year, the five-star hotels will be empty, but is nonetheless ready to co-finance their construction, and sometimes up to 100% of total budget.