Publication: Eurasia Daily Monitor Volume: 3 Issue: 25

Russian President Vladimir Putin has every reason to be pleased with his performance at last week’s press conference. For three and a half hours he confidently and smoothly handled a barrage of questions, not all of them conveniently pre-arranged, projecting the image of a competent leader completely at ease with the job (Nezavisimaya gazeta, Globalrus.ru, February 1). His assertive delivery reinforced the “never-better” message about the state of the federation that was centered on strong growth and high profits (Polit.ru, February 3). Putin was definitely seeking to accentuate the shift in public mood registered by many opinion polls. For example, the Levada Center established that only 39% of respondents at the start of this year thought that Russia’s economic situation was bad (against 47% a year ago) and only 48% (against 54%) did not expect any improvement (www.levada.ru). Traditionally, Russians think that Putin is doing a particularly good job in foreign relations, so they would have been surprised to know that Russia’s popularity in the world has taken a sharp dip; for example, in France only 21% of respondents now perceive it positively (down from 30% last year) while 62% have a negative opinion today (Newsru.com, February 3).

This striking divergence of perceptions focused on stability and prosperity and external impressions shaped by shrinking democratic freedoms and blossoming corruption can only be explained by Putin’s pro-active policy of promoting Russia as an “energy superpower.” He devoted much time to elaborating various aspects of this policy at the press conference, insisting in particular that the new gas prices for Ukraine had not been “picked from the nose” but calculated according to a “mathematic formula.” To account for all the arm-twisting and horse-trading behind closed doors, such a formula should be pretty complicated and many European customers have reasons to worry about the margin of error in such mathematical exercises as last week’s tortured agreement between Gazprom and Naftohaz Ukrainy on creating the joint venture Ukrgaz-Energo (Kommersant, February 3). Gazprom’s interests evidently are equal to the Kremlin’s interests, since Putin has proved this political theorem far beyond reasonable doubt.

He returned to this point yet again when replying to a question about the prospects of the oil-and-gas industry portraying Gazprom as a flagship company on par with multinational energy giants. What was slightly peculiar about this boasting was the comparison with Norway where, according to Putin, “The oil-and-gas sector is completely monopolized by the state,” since Statoil and “the other company” (Norsk Hydro is probably quite upset that its brand name was forgotten) are owned by the state (Polit.ru, February 3). The obvious deficiency in this comparison is that Norway has two companies that often compete with one another, while Gazprom enjoys full control over Russia’s colossal gas reserves. Putin personally rejected reformist proposals from the “liberal” wing of the government to divide this unhealthy monopoly into several Lukoil-size companies (Novaya gazeta, December 26, 2005).

There is, however, a larger problem with Putin’s reference to Norway. His lieutenants, who developed a taste for managing energy businesses while looting Yukos, would be probably quite surprised to discover the scale of efforts in Norway aimed at securing the independence of Statoil and Norsk Hydro in running their business and also at making sure that the decision-making in the Ministry of Oil and Energy is not unduly influenced by the particular interests of these companies. Declaring its commitment to fair market competition, the Kremlin has in fact assumed the role of chief lobbyist for Gazprom’s interests. Even in Italy, despite the very special friendship between Putin and Prime Minister Silvio Berlusconi, there are increasing worries about the joint Kremlin-Gazprom intrigues in Turkey and their new initiatives in Libya and Algeria that could be seen as shaping a cartel-type agreement on delivering natural gas to Southern Europe (Corriere Della Sera, February 3).

Central European countries are joining ranks against the “political” pipeline under the Baltic Sea that is designed by Gazprom according to the Kremlin’s masterplan for increasing their vulnerability to Russia’s “gas weapon” (Lenta.ru, January 31). This hugely expensive project (the conservative estimate is above $5 billion) illustrates yet another difference: Norway carefully plans the development of its limited hydrocarbon resources, but Russia focuses primarily on constructing new pipelines while investing amazingly little in the declining production. Such a policy may look absurd, except for the insider appropriation of immediately fungible profits from construction projects (Novaya gazeta, February 2).

Putin emphasized with particular pride Gazprom’s newly strengthened multinational character, since German partners had acquired some 10% of its shares. That entente cordiale invites, however, more questions. Was it just a coincidence that Deutsche Bank closed its credit line to Ukraine exactly when Gazprom encountered hard resistance to its proposal for Ukrgaz-Energo? (Vedomosti, January 31). Was it a bit too convenient that German banker Mattias Warnig, an old acquaintance of Putin with a Stasi background, has been chosen as a prime candidate to become one of Gazprom’s “independent” directors? (Vremya novostei, February 2). Internationalization of this murky kind certainly does not bring Gazprom a step closer to international standards of transparency, which Norway upholds so scrupulously.

When asked about his plans for becoming Gazprom’s CEO, Putin asserted that he did not fancy himself as a businessman. Indeed, growing into a godfather-like figure for a cabal of Kremlin insiders sitting on the top of the vast army of predatory bureaucrats is not enough to qualify for the elite in this profession. Putin’s relaxed confidence can hardly alleviate worries about job security in the vast presidential pyramid of power; there is no safety in numbers for his courtiers, so they seek it in size, trying to make Gazprom too big for failure. One might wonder: have they heard that the Enron trial has started?