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Russia: Energy Company Boards Reshuffled

  • Floriana Fossato

A series of shareholder meetings held in recent days has resulted in a reshuffling of the governing boards of several major Russian companies. RFE/RL's Moscow correspondent Floriana Fossato reports that the changes will likely have greater consequences for the country's politics than for its economy.

Moscow, 2 July 1999 (RFE/RL) -- It has been a week of shareholder meetings for Russia's largest and most influential companies, including natural gas giant Gazprom and electricity monopoly Unified Energy Systems (UES).

Within one week, two key Kremlin loyalists were installed to chair the board of directors of both monopolies. First, the head of the presidential administration, Aleksandr Voloshin was elected chairman of the board at UES. And two days ago Viktor Chernomyrdin, Russia's former prime minister and President Boris Yeltsin's special Balkan envoy, was elected to chair Gazprom.

In addition, UES shareholders have approved an important change in the company's charter, making it impossible to fire the company's chief executive officer, Anatoly Chubais, without the consent of at least 75 percent of its shareholders.

Analysts say these moves strengthen the Kremlin's control over the energy monopolies and their cash flows ahead both of parliamentary elections in December and a presidential vote in June 2000. The daily "Komsomolskaya Pravda" this week wrote that, "with the elections approaching, the position Chernomyrdin has taken is truly strategic.... As a financial colossus," the paper said, "Gazprom cannot hope to remain above politics."

With Chernomyrdin as chairman of the board, Yeltsin and his government can now count on a counterweight to Gazprom chief executive officer Rem Vyakhirev. Last year, the government argued vehemently with Vyakhirev over the payment of taxes and the sale of some Gazprom shares.

Ahead of this week's shareholders' meeting, Moscow had been full of rumors that the government would try to replace Vyakhirev. But Gazprom's charter makes that extremely difficult.

One day before the Wednesday meeting, Prime Minister Sergei Stepashin, accompanied by Voloshin and Chernomyrdin, visited Gazprom headquarters and met Vyakhirev, reportedly for last-minute negotiations. A compromise was reached that allowed Vyakhirev to remain at Gazprom's helm. But Chernomyrdin -- who founded and first ran the company at the end of the Soviet-era -- returned to a position of power.

Chernomyrdin, attending a gathering of the World Economic Forum in Salzburg, today insisted that outsiders not interfere in Gazprom's work.

"My deep understanding [is] that the first thing for Gazprom is that no-one should intervene and hamper its activity."

The state owns 38 percent of Gazprom, Russia's biggest company and the key to government efforts to boost the state's revenues. Gazprom, whose sales totaled some $7 billion in 1998, is Russia's biggest taxpayer, but it is also its biggest tax delinquent.

At the annual shareholders meeting, Gazprom officials said the company had been hit hard by last year's Russian financial collapse. Its losses in 1998 totaled the equivalent of some $1.8 billion.

Gazprom largely depends on exports for revenues. It sells gas to foreign countries for a price five times above domestic prices and obtains timely payments in hard currencies.

Last December, Gazprom sold 2.5 percent of its shares to Germany's Ruhrgas for $600 million. It had announced it would sell another such stake this year, to boost government revenue. But Chernomyrdin this week called on the government to slow down the move.

At a press conference following the shareholders' meeting, Chernomyrdin and Vyakhirev said they would cooperate and down-played their supposed rivalry.

Both men declined to elaborate in detail on their political preferences. Vyakhirev said only that the company's goal "is to make sure the country does not freeze next winter." Perhaps more significantly, Chernomyrdin said the State Duma lower house elections are "the most important political event of the near future."

Chernomyrdin is also the leader of the "Our Home Is Russia" bloc, which controls the second-largest group in the present Duma. In the past, he has said that he will run for president when Yeltsin's term expires next year. Last year, however, Chernomyrdin's popularity plummeted after his ouster as prime minister.

Gazprom officials (unnamed) reportedly indicated that the company will decide whom to support at parliamentary elections after the Kremlin makes public its own preferences.

Gazprom supports a powerful cohort of regional officials at all levels, and controls a network of electronic and print media in regions related to the oil and gas industry. Earlier this year, some analysts said that the company could help bring into parliament more than 100 deputies, independent of their political affiliations.

In another development this week, former tax minister Boris Fedorov, whose brokerage company holds a stake in Gazprom, withdrew his candidacy to the board of directors of the company. Fedorov, who is now one of the leaders of the "Right Cause" center-right political bloc, last year led an aggressive battle with Gazprom over tax payments.

While Fedorov did not make it to the Gazprom board, he was named last week to the board of directors of UES. This week, he was made a member of the supervisory board of Sberbank, Russia's state-controlled savings bank, an institution present virtually everywhere in the country. Both UES and Sberbank wield enormous power over the country's regions.

The state owns 52.5 percent of UES, while foreign investors own 33.6 percent. The company operates the world's largest electric grid and is Russia's second largest company, after Gazprom. Its main problem, according to its chief Chubais and to analysts, is the collection of cash. Many of UES' biggest customers are perpetually underfunded government agencies that cannot afford to pay their electricity bills.

This is a problem UES shares with most Russian companies. Only some 30 percent of payments within the Russian economy are made in cash, while the rest is made in barter.

In what is considered an achievement for Chubais, UES has managed to boost cash collection to 27 percent, from 21 percent last year. UES is both debtor and creditor to hundreds of public and private companies throughout Russia.

Chubais told NTV commercial television after the shareholders' meeting that UES hopes to earn $350 million in the next two years from electricity export deals with China, Japan and other countries. This, he said, would make up for massive debts by domestic customers.

The candidacy of Yeltsin's chief of staff, Voloshin, for chairman of the UES board of directors was proposed by Stepashin. Moscow analysts disagreed over the importance of the appointment. Some said that the appearance of Voloshin at UES indicates a union between Chubais and the Kremlin.

Others said that the appointment of a member of Yeltsin's inner circle at UES could mean that the President's so-called extended "family" is trying to expand to include an important asset in order to consolidate the Kremlin's role as electoral kingmaker.