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Russia: Media-MOST Strengthens Partnership With Gazprom

Russia's best-known private media conglomerate said this week it is strengthening ties with the country's richest company, Gazprom. RFE/RL correspondent Floriana Fossato looks at the reasons why Media-MOST is cozying up with the powerful gas giant.

London, 10 December 1999 (RFE/RL) -- Media-MOST, the company that runs some of Russia's most popular newspapers and television stations, already has ties with Gazprom. And a spokesman for MOST told RFE/RL this week it may soon count the gas monopoly among its owners. Dmitry Ostalsky says that MOST is close to concluding a deal to sell a 13 to 15 percent stake to Gazprom for an undisclosed price.

Most observers have interpreted the move as a reflection of the media group's need to protect itself from increasing financial and political pressure. Last week, Media-MOST suffered a setback in a long-running fight with the state-owned Vneshnekonombank, when a court ruled that the media group must pay $42 million owed to the bank either in cash or through seizure of assets. Media-MOST said it will pay the debt in cash.

Earlier this month, Media-MOST suffered a blow to its television station NTV when Video International, one of Russia's biggest advertising agencies, announced that it was giving up its exclusive rights as advertising agent for NTV. Instead, the ad company said, it is switching allegiance to another television station, ORT.

ORT, Russia's largest television station, is reportedly under the control of Boris Berezovsky, a rich tycoon and Kremlin insider. Berezovsky is the arch-rival of Media-MOST's founder, Vladimir Gusinsky.

Analysts have said the deal with Gazprom is a way for Media-MOST to fend off the financial pressure resulting from the loss of its major advertiser and the debt to the bank. Company spokesman Ostalsky, however, dismissed that thesis. He says the deal with Gazprom should be interpreted only as the strengthening of old ties.

"Gazprom is an old partner of ours. Since 1996, it holds 30 percent of NTV television channel. So it would be correct to say that it is our strategic partner. I hope our relationship does not depend in any way on the political situation. This is a normal deal between strategic partners."

Gazprom officials have not commented on the deal. Just a few months ago (in July), when several Russian reports alleged that the gas monopoly was acquiring control of a 25 percent stake of Media-MOST as collateral for a loan of some $800 million, Gazprom head Rem Vyakhirev angrily denied that any deal was under way. He said that unidentified forces were "trying to involve" Gazprom in the media wars between Gusinsky and the Kremlin. And he added that "Gazprom has no political preferences."

Media-MOST officials have claimed that the Kremlin was behind the Vneshnekonombank fight. They say the Kremlin is putting pressure on MOST newspapers and broadcasts ahead of parliamentary and presidential elections.

This is because, they say, Media-MOST-controlled outlets have been supporting the Kremlin's main political opponents, former prime minister Yevgeny Primakov and Moscow Mayor Yuri Luzhkov. The group's NTV, Echo of Moscow radio station, daily newspaper "Segodnya," and the weekly "Itogi" have given increasingly favorable coverage to the two men, who are leaders of the Fatherland-All Russia bloc.

Ostalsky told RFE/RL that Media-MOST is also continuing negotiations with American and European investment funds over the sale of another stake. But, he said, there is a difference between the two deals.

"There has been information that we are in negotiations also with some international investors, big investment funds. These two deals are not related in any way. [With Gazprom] there is a partnership agreement. [With the investment funds] there are investment motivations only. As I say, talks with big investment funds are going on and, in some cases, we are reaching the final phase. The question is how big a share [of Media-MOST] will be sold."

Ostalsky said the sale of stakes to investment funds is part of Media-MOST's strategy to reach international markets. That outreach suffered a major setback in the aftermath of the August 1998 Russian financial collapse, another source of financial woe for the media conglomerate. Before the financial crisis, Western audits of Media-MOST valued the company at up to $2.5 billion, while in the Spring of this year officials put the value at no more than $1.8 billion -- a drop of nearly one-third.