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Russia: Pre-Election Wrangling Wins Kremlin Greater Role In Gazprom

An extraordinary meeting of share-holders of the Russian gas monopoly Gazprom today highlighted wrestling among the main players for control over the country's largest company. The session ended with an unsurprising compromise. However, RFE/RL Moscow correspondent Sophie Lambroschini reports that the importance of the company for upcoming elections leads analysts to believe that today's compromise is only temporary.

Moscow, 26 August 1999 (RFE/RL) -- At today's meeting, shareholders voted in one additional representative of the state on the board of directors. The state now has five out of eleven directors on the board, increasing its influence.

The struggle for influence isn't solely about corporate finance and the national economy. At issue is the fact that Gazprom represents a source of potential funding for election campaigns. One key question is who will Gazprom support in December parliamentary elections?

The Kremlin is worried that Gazprom might support its opponents. So today's meeting was just one step in a battle that is expected to last for another few weeks at least.

According to Denis Rodionov, an expert with Brunswick-Wartburg, "the Kremlin suspects Gazprom's CEO Rem Vyakhirev of sympathies towards two enemies of the Kremlin," Moscow Mayor Yuri Luzhkov and former prime minister Yevgeny Primakov. Luzhkov and Primakov joined forces this month. Rodionov, speaking with RFE/RL today, says that the latest development represents "another act of pressure from the Kremlin against Vyakhirev".

Self-proclaimed Kremlin insider and lobbyist Boris Berezovsky admitted as much in an interview with the French daily Le Monde. Berezovsky is quoted as saying that it would be "completely abnormal that this potential source of financing would be used against the president and the government."

Analysts believe that the Kremlin and the government would like to sack Vyakhirev and put one of their men in his place. The reelection today of former prime minister Viktor Chernomyrdin as head of the board is seen as a compromise between Vyakhirev's majority and the government's influence. Chernomyrdin headed Gazprom before its privatization but has kept a close link to the company.

Gazprom is the country's biggest export earner. Exports totaled $7 billion in 1998, which makes it especially attractive in a cash-strapped economy. Exaggerating only slightly, Vlast-weekly says that whoever controls Gazprom controls the whole of the country and can substantially influence parliamentary elections.

An emporium of daughter-companies and affiliates, Gazprom supports a powerful group of officials in many oil and gas producing regions.

The gas monopoly also has significant media holdings. In addition to a 30 percent share in NTV, Gazprom controls a network of electronic and print media in the regions. Some analysts believe that the company is influential enough to bring into parliament more than 100 deputies out of the total of 450, regardless of their political affiliations.

Vlast notes that Gazprom can also pave the way to influence in Russia's energy monopoly and second largest company -- UES. The paper says that "The control over Gazprom is also a way of controlling UES, because the energy holding owes Gazprom tens of thousands of millions of rubles. And UES is creditor to half of the country."

Rem Vyakhirev hasn't publicized any political preferences. However, media reports as well as experts say that the Kremlin has every reason to worry that Vyakhirev may support Luzhkov and Primakov.

The Moscow government and Gazprom have a serious financial link, considering that Gazprom, which is Russia's biggest taxpayer, pays its taxes in Moscow. Gazprom's 30 percent stake in NTV commercial television also raises questions about Vyakhirev's political leanings since NTV is a regular Kremlin critic.

Moreover, Gazprom owes Primakov some favors. When he took office last fall after the August crisis, Gazprom was battling against former prime minister's Sergei Kiriyenko's drastic measures to collect tax revenues from Gazprom, Russia's greatest tax-delinquent. Under Primakov, Gazprom managed to negotiate about $450 million worth of concessions from the government.

The Kremlin has no easy or clean way to oust Vyakhirev. Gazprom's charter says that to fire the CEO before his term comes to an end in 2001, the board of directors must vote unanimously for his removal. So, unless Vyakhirev had agreed to vote his own dismissal there was no chance of getting him out.

The authorities have no other choice than to resort to applying pressure on Vyakhirev to push him to resign. Russian media reports have compiled a lengthy list of tricks and traps that have or could be used against Vyakhirev.

First of all there are legal ways. According to Rodionov, Gazprom's Achilles heel constitutes the instances of mismanagement that would feed a case against Vyakhirev.

Already, several media reports have focused on the very mysterious trading company Itera, speculating that it may be handling illegal gas exports for Gazprom. Last week a feature broadcast by Russian public television ORT, of which the state is a majority share-holder, showed footage of alleged Gazprom-owned luxury hotels and houses on the Black Sea Coast. ORT also said Gazprom was violating minority shareholder's rights.

Also, more consequential attacks on Gazprom's financial health could compromise its reputation and therefore its share price. Rodionov explains that "the fact that Chernomyrdin is head of the board of directors is a big help here. His function comprises few powers. However, he has the enormous advantage of being allowed to collect and consult all the financial documents of the company."

The economist and politician Boris Fyodorov ran as an independent candidate to the board as head of United Financial Group, which represents the interests of some six percent of small share-holders. Fyodorov was quoted in yesterday's Vremya-MN agreeing that Vyakhirev can be put under pressure to resign. Referring to the many mismanagement problems, Fyodorov says Gazprom has no other choice but to work out common ground with the government.