Gazprom resurgent

With Patrick Crow from Washington, D.C
[email protected]

Gazprom, Russia's giant gas monopoly, has survived a major clash with the Russian government.

The firm is Russia's largest company and one of its most influential. It was a major backer of President Boris Yeltsin in his reelection campaign.

Gazprom controls about a third of the world's gas reserves and is a major exporter to western Europe (see Watching the World, p. 30). It accounted for 94% of Russia's 601 billion cu m of gas production last year.

But the firm has run afoul of the government because it owes $15 trillion rubles ($2.6 billion) in back taxes, which the government badly needs. Gazprom explains that its customers owe it three times that amount (OGJ, Nov. 4, 1996, p. 40).

Last month Yeltsin added two reformers to his cabinet, Boris Nemtsov and Anatoly Chubais, gave them both the rank of first deputy prime minister, and charged them with the job of reforming Russia's gas, electric, and railroad monopolies.

Minister resigns

Prime Minister Viktor Chernomyrdin, a former Gazprom chairman, has laid low recently. But Russian Fuel and Energy Minister Pyotr Rodionov resigned, saying he could not work with Nemtsov and Chubais.

Rodionov was director of Lentransgaz, the St. Petersburg regional unit of Gazprom, when he was named energy minister last August. He achieved few reforms as minister and now is expected to be named Gazprom's vice chairman.

Nemtsov has charged that the Russian government should reassert its control over Gazprom and force reorganization without dismantling it. He especially had been critical of a 1993 deal that allowed Gazprom Chairman Rem Vyakhirev to control a 35% state interest in the firm.

The International Monetary Fund also has been pressuring the government to loosen Gazprom's monopoly as a condition for releasing loans.

Vyakhirev recently went on the offensive, telling the Duma, the lower house of parliament, that foreign oil and gas companies were working through the IMF to break up Gazprom.

Deal reached

Later, a deal was reached at a summit between Vyakhirev and Nemtsov. The former will keep control of the government's 35% interest.

But Gazprom will pay at least 7 trillion rubles of its tax debt by June 10, stay current on tax payments, submit to regular audits, allow oil producers access to its lines, and yield its monopoly to develop gas fields.

Vyakhirev said Gazprom will divest nonessential activities into independent companies in order to cut costs and streamline management to improve decision-making.

He said the changes will save 3 trillion rubles/year and shift 100,000 employees to independent firms.

To help Gazprom, the government has ordered a very unpopular increase in gas prices for household consumers. They will rise to 65% of industrial wholesale prices by Oct. 1, 80% by Apr. 1, 1998, and 100% by Jan. 1, 1999.

Critics already are complaining Gazprom's changes are superficial and the company will continue business as usual.

It also will be interesting to see whether Yeltsin's next energy minister will be from an oil or gas firm or a reformer who will seek more change in those industries.