REFORM OF GAZPROM SHARES’ MARKET: LESS THAN SWEEPING?

Besides installing allies of President Vladimir Putin and Gazprom chief Aleksei Miller, the personnel changes at that partially state-owned gas monopoly, which coincided with the end of Miller’s first 100 days as CEO, seem to have been aimed, as the Polit.ru website put it, at countering “a wave of criticism” in the Russian media that Miller has not moved decisively enough to clean house and institute reforms (Polit.ru, September 3). Some observers, however, have warned against reading the shake-up as a sign that Miller is committed to a sweeping overhaul of Gazprom. First, there are indications that neither the government nor the regulatory or law enforcement agencies are interested in calling Gazprom’s former management to account for alleged asset stripping and sweetheart deals. In late August, for example, the country’s securities commission ruled that no laws or regulations were broken in a 1995 deal by which Stroitransgaz acquired a 4.83-percent stake in Gazprom-which had an estimated market value of at least US$70 million at the time (see the Monitor, August 31).

In addition, Miller has reportedly decided to eschew a radical restructuring of the gas giant, at least in the near term. The newspaper Vedomosti reported today that Putin has approved a plan drafted by a Kremlin working group on liberalizing the Gazprom shares market. That working group is headed by first deputy presidential administration chief Dmitry Medvedev, who is also deputy chairman of Gazprom’s board of directors. While liberalizing some aspects of the Gazprom shares’ market, the plan retains, at least for the time being, the current division into domestic and foreign markets as well as the existing rule that foreigners can own no more than 20 percent of Gazprom’s shares (Vedomosti, September 6). Foreigners, who also cannot own local Gazprom shares, must purchase Gazprom ADRs (American Depository Receipts), which are twice the price of local shares. While the Medvedev plan envisages eventually doing away with the distinction between domestically owned and foreign-owned Gazprom shares, many observers thought the new Gazprom management would move more expeditiously to do away with such restrictions. As the Polit.ru website said in reaction to Vedomosti’s report of today: “The proposals of the liberalizers are far from revolutionary” (Polit.ru, September 6). Vedomosti reported last week that Miller is “resisting radical changes,” including the government’s own plan to split off Gazprom’s production units from its gas transportation system in order to increase transparency and efficiency and give other gas producers access to Gazprom’s pipeline system. According to the paper, Gazprom’s management is willing to set up a separate gas transportation company, but wants the new company to be entirely owned by Gazprom (see the Monitor, August 31).

“So what are we supposed to do with the long expected reforms of the monopoly?” one observer asked rhetorically this week. “From all appearances, the public is in for disappointment in this department-at least in the foreseeable future. From the fragmentary discussion in the press it has become clear that no radical steps whatsoever are thus far planned for the rather conservative market of Gazprom shares. Besides which, the new [Gazprom] leadership, to the surprise of the public, has expressed its solidarity with the position of the old Gazprom team in relation to transferring the pipeline from… the monopolist to public use. Aleksei Miller insists that this is not worth doing” (Vesti.ru, September 4).

Meanwhile, a newspaper claimed today that it had gotten hold of a letter written by Sergei Dubinin, the former central banker who is now Gazprom’s chief financial officer, to Pyotr Rodionov, on August 28-the eve of the latter’s promotion to the number two spot in the gas monopoly. According to the paper, the letter describes Gazprom as teetering on the brink of insolvency and desperately needing new loans in order to pay off old ones. Dubinin reportedly warns that under certain circumstances, such as a drop in gas prices on the European market and a corresponding drop in Gazprom’s export revenues, banks may refuse to extend it short-term credits (Nezavisimaya Gazeta, September 6).

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