Accessibility links

Breaking News

Russia: Former Government's Policy On Gazprom Reversed

Moscow, 9 October 1998 (RFE/RL) -- Russia's huge natural gas monopoly Gazprom, targeted by former Prime Minister Sergei Kiriyenko as one of the country's biggest tax delinquents, is returning to its more customary role as the respected main contributor to the cash-strapped national coffers. Except that this time, not much cash is to be expected from the company.

Gazprom Chief Executive Rem Vyakhirev met early this week (Oct. 5) with Kiriyenko's successor, Yevgeny Primakov. In keeping with Primakov's usual reserved manner, the prime minister made no comment after the meeting. But yesterday, after talks with recently appointed Tax Service head Georgii Boos, Vyakhirev announced that Gazprom and the new government had agreed on a mechanism to settle the company's tax arrears.

Vyakhirev today is expected to address those Duma deputies who, during the summer, vigorously defended Gazprom's interests against Kiriyenko's attempts to impose fiscal discipline.

On Tuesday, one day after his meeting with Primakov, Vyakhirev was quoted (by the Bloomberg news agency) as saying that under the new agreement, Gazprom's tax arrears would be settled by canceling state-subsidized companies' debts for natural-gas deliveries. Such an agreement would signal that Primakov's government is reversing former policies that required cash payments of all taxes.

Gazprom has long maintained that the government's unpaid gas bill to the company is as big, if not bigger, than Gazprom's unpaid taxes.

Yesterday, Vyakhirev said Gazprom had agreed to pay its September taxes within a matter of days. He made the announcement in a relaxed manner that was in strong contrast to his public appearances during the summer.

At that time, Vyakhirev reluctantly agreed to make monthly payments on back taxes only after Kiriyenko and former Tax chief Boris Fyodorov threatened to seize Gazprom's assets unless the arrears were settled. Kiriyenko also had threatened to review a trust agreement under which Vyakhirev manages a big part of the state's 40 percent package of shares in Gazprom.

Gazprom's heated discussions with the former government during the summer focused largely on the size of the company's monthly tax-arrears payments. The government insisted that the company would have to pay more than $3 billion a month, while Gazprom said it could pay no more than $2.4 billion.

Yesterday, in announcing the new accord on tax arrears, Vyakhirev said the exact sums involved would be revealed later, after what he described as a number of purely technical issues were settled.

Boos said that a joint protocol satisfying both sides would likely be made public today. He also said that he had ordered regional tax-service branches across Russia to unfreeze bank accounts and properties previously confiscated from Gazprom's subsidiaries.

On the eve of Wednesday's (Oct. 7) nationwide protests, Primakov declared in a televised address to the nation that the government would pay for more than $1 billion worth of equipment previously confiscated from tax delinquents. He said it would do so in order to help those enterprises survive the current acute financial crisis.

Primakov also said that Belarus and Ukraine would be allowed to pay debts to Russia with bartered food. Both countries depend on Russian gas supplies for their energy needs and most of their debt to Russia is concentrated in the energy sector.

Now that Gazprom -- Russia's biggest taxpayer -- has agreed with the new government to offset tax debts, other companies may soon follow suit. International financial organizations have often said that the Russian government's chronic failure to collect taxes from both companies and individuals is a major cause of its cash shortage.