Even by Russian standards, Samara Oblast, a grim region 535 miles southeast of Moscow, is a dangerous place. There are four cities here. One of them, Togliatti, the country’s automaking capital, endured a six-year mafia killing spree that claimed more than 100 lives. A second city, Novokuibyshevsk (Novo, for short), boasts a collection of oil and gas refineries—and a powerful local mob organisation known as “Indeitsy”, which is Russian for “Indians”, as in the raiding parties of Western lore.
After reviewing over 200 documents and interviewing scores of local police officials, government investigators and oil executives over the past few months, Forbes has learned that Indeitsy controls the oil-industry rackets in Novo. The group’s 400-odd members and associates have created a lucrative niche for themselves by cutting into pipelines in ever more sophisticated ways and then trafficking in the stolen crude, as well as oil products and related plastics.
This Russian operation is incredibly important to Hess. Overall, the com- pany’s production—and profit—is down. Hess had $1.7 billion in net income last year—off 20 percent. In the first quarter of 2012 net income was $545 million, roughly half what it was a year ago. The company’s cash flow has been negative for the past two years. The Samara venture, though, has been a bright spot since Hess entered the region in 2005. Figures for last year aren’t available, but in 2010 the Russian division showed earnings of about $122 million, up 48 percent from 2009, according to Dun & Bradstreet. And a few recent oil discoveries look very promising. Hess’ initial stake in the venture was 65 percent; over the past few years, as the division prospered, Hess upped its stake to the current 85 percent.
The Samara police report goes into extraordinary detail on the Indeitsy mafia. It identifies the godfather as a 38-year-old man who goes by the nickname “Vinnie”—proof, knowledgeable locals say, that the thug watched too many Hollywood movies. Vinnie’s right-hand man—known as “Koptel”—was once an executive at the oil construction company to which Hess still subcontracts the majority of its pipeline work.
(This story appears in the 20 July, 2012 issue of Forbes India. To visit our Archives, click here.)