Publication: Monitor Volume: 4 Issue: 114

Gazprom President Rem Vyakhirev hit the media trail last week to head off possible steps to extract some of the US$700 million in back taxes his company owes. He called on the government to abandon its proposal to require Gazprom to pay taxes when gas is dispatched to the customer–rather than waiting until the latter pays. As less than 10 percent of Gazprom’s domestic customers pay cash, Vyakhirev argued that this would be “the end of Gazprom.” (Financial Times, June 15, NTV, June 14)

He also threatened to stop signing new contracts to sell more gas to the West, saying that the slump in international gas prices over the past six months means that the company is losing US$1 for each 1,000 cubic meters they sell. He consequently called for a cut in the rate of VAT and gas excise tax, currently 22 percent and 30 percent respectively. The threat is bluster. It was only two weeks ago, on May 21, that Vyakhirev signed a deal with Ruhrgas to extend Gazprom’s supply of 13 billion cubic meters a year (worth US$1 billion annually), through 2020. (Nezavisimaya gazeta, May 22)

Vyakhirev also objected to a decree that President Yeltsin signed last week authorizing Gazprom to cut prices by 30 percent. Vyakhirev sarcastically noted that “we have been cutting prices for five years–by up to 100 percent” referring to the non-paying habits of their customers. (NTV, June 14) Yeltsin’s decree is based on the premise that if prices are lower, customers will start paying, particularly if faced with the threat of being cut off. The latter threat is real. The utility company in Kostroma, a city of 270,000, had its gas cut off on May 15 for arrears totaling 200 million rubles. As a result, the city’s entire centrally piped hot water supply was shut down at the beginning of June. (Moscow Times, June 12)

Vyakhirev is probably secure. He turned back a similar attack on his company during the liberals’ “spring offensive” last year. To go into effect, the proposal to require advance payment of taxes will have to be approved by the Duma–where Gazprom has many “friends.” Vyakhirev has also been building alliances within the business community–he was the moving force behind last week’s meeting of ten businessmen, who gathered in Gazprom’s Bogorodskoe villa. (Obshchaya gazeta, June 11)

In a bid to be constructive, last week Vyakhirev proposed selling 2 to 3 percent of Gazprom shares to one of its Western partners. On June 11, First Deputy State Property Minister Aleksandr Braverman said the government will take up the suggestion–and intends to sell 5.87 percent of the state’s 40.87 percent stake in the company.