Novak stays as energy minister in new Russian government

Moscow — Alexander Novak has retained his position as energy minister in the new Russian government led by Mikhail Mishustin, according to a decree posted on the Kremlin website, signed by President Vladimir Putin.

Novak has served as energy minister since 2012, and played a key role in negotiating and maintaining the OPEC+ crude production cut agreement.

His reappointment, alongside constitutional changes announced by President Vladimir Putin last week that could see him retain significant power after his current term of office expires in 2024, indicate that there may be continuity in Russian energy policy despite the shakeup.

"Putin will likely remain the ultimate arbiter of OPEC+ cuts. He must weigh the geopolitical and economic benefits of cooperation with Saudi Arabia, versus the desire of some domestic producers to unfetter supply with Brent above $60/b," chief geopolitical adviser at S&P Global Platts Analytics Paul Sheldon said in a research note last week.

Both Novak and Putin have so far supported the OPEC+ production agreement, which has boosted oil prices and opened up lucrative opportunities for Russian companies to increase bilateral cooperation with OPEC member states.

Before taking over as energy minister, Novak served as deputy finance minister for almost four years. He also served in local government positions in the resource-rich Krasnoyarsk region, where most of the country's nickel, cobalt and platinum resources are concentrated, as well as sizeable coal and gold extraction.

Finance minister stays

Another key figure for the energy sector, Finance Minister Anton Siluanov, also retained his post according to another decree posted on the Kremlin website.

"For the oil industry, the choices for energy and finance minister will be the crucial, as they try to resolve tax uncertainties," Sheldon said.

"The largest headwind to medium-term production growth is the collision of interests between fiscal requirements and incentivizing new production," he added.

Energy is a vital sector for Russia, which produces more than 11 million b/d of crude oil and is Europe's largest supplier of natural gas. Revenues from the oil and gas sector accounted for over 40% of Russia's budget revenues in 2019. Furthermore, oil and gas exports are primarily paid for in foreign currency, helping the government to mitigate the impact of volatility in the ruble exchange rate.

The government is now lead by former head of the federal taxation service Prime Minister Mikhail Mishustin, who gained a reputation for improving tax collection processes and embracing new technology in his previous role.

Other appointments which impact the energy sector announced Tuesday include Dmity Kobylkin retaining his position as natural resources minister, and Sergei Lavrov staying on as foreign minister, a position he has held since February 2004. Energy has played a key role in Russia's foreign policy in recent years as it seeks to export energy and military expertise to strengthen its global role, and build new alliances, particularly in the Middle East and Africa.

Some changes to key economic positions were also announced Tuesday. Economy Minister Maxim Oreshkin was replaced by Maxim Reshetnikov, and Dmitry Kozak, who served as deputy prime minister with responsibility for energy, was not included in a list of deputy prime ministers on the Kremlin website.

Agriculture minister Dmitry Patrushev retains his position, according to a presidential decree. Russia is the world's largest wheat exporter and profited from the warming in relations with Saudi Arabia which changed its import rules in 2019 in a way that allowed wheat imports from Black Sea origins such as Russia.