An investigation of dealings between Russia's Gazprom and the Itera Group has raised new questions about profits from the country's state-owned resources. President Vladimir Putin has pledged to reform Russia's energy sector, but he has yet to shed light on its biggest monopoly.
Boston, 15 August 2000 (RFE/RL) -- After months of speculation, there are signs that Russian President Vladimir Putin may be ready to crack down on the mysterious dealings of the state-owned gas monopoly Gazprom.
The Financial Times reported last Friday that Russia's state accounting chamber has been investigating a huge transaction by Gazprom's marketing partner Itera in the arctic region of Yamalo-Nenetsk.
According to a report by the state auditing agency, the regional administration sold 66 billion cubic meters of gas to Itera, apparently without charging a profit, after Gazprom paid the gas to the region's budget as a tax.
Itera then reportedly sold the gas through affiliates at rates that were in some cases more than 40 times the purchase price. An Itera official said the report did not reflect the charges that were paid to Gazprom for use of its pipelines, but the official did not say what the company's profit was.
The auditing investigation by Yuri Boldyrev, one of the founders of the Yabloko party, has been trying to answer a central question about Gazprom. Why does it channel so much of its business through Itera, a company with corporate offices in the United States.
Itera, whose offices are in the southern U.S. city of Jacksonville, Florida, has long been a focus of unanswered inquiries. The Financial Times called the company's ownership a "closely guarded secret." An Itera vice president has now promised to publish a list of shareholders in a matter of weeks.
But Itera, which was started in 1992, has already spawned 120 subsidiaries and affiliates. Previous plans have called for some to become independent. It is unclear whether the disclosures will include all the Itera entities. The Financial Times cited widespread suspicions that Itera is secretly owned by "Gazprom's management or their relatives."
The complexities of the gas deal with Yamalo-Nenetsk appear to have much in common with the transfer pricing schemes that have been used by many Russian enterprises as a legal way to avoid taxes. Under the schemes, enterprises that face high taxes can sell their goods at low prices to related companies or distributors that enjoy tax exemptions or lower rates.
While it is unclear whether the transfer of gas through a regional government fits the same pattern, the arrangement could have huge consequences for Russia and benefits for Gazprom, its biggest taxpayer. The amount of gas handled by Itera under the 1997 deal with Yamalo-Nenetsk equals one-tenth of Russia's production and five times the amount used annually by Turkey.
According to Itera, the company is supplying gas to 11 former Soviet republics. But there have been few details about its profits from doing business with Gazprom, or the costs and benefits to the Russian treasury.
Because the government owns 38 percent of Gazprom, it could be expected to benefit even if the company found a way to save on its tax payments. But if Gazprom has been shifting assets to reduce both its taxes and profits, the state may be the big loser, unless it can collect from Itera instead.
More investigations of Gazprom may be needed to convince Putin's critics that his campaign against corruption is more than a pressure tactic against political enemies. Last March, former Prime Minister Sergei Stepashin, the head of the State Duma's Corruption Commission, pledged to Western audiences that Putin would examine energy monopolies and introduce competition. So far, his moves regarding Gazprom have smacked more of manipulation than reform.
In June, Putin succeeded in ousting former Prime Minister Viktor Chernomyrdin as Gazprom's chairman. Former Deputy Prime Minister Boris Fyodorov, who has vowed to investigate Itera, was also named to the board. But so far, few details of the ties to Itera have emerged. In his recent confrontation with oligarch Vladimir Gusinski, Putin pressured Gazprom to recall its loan to the Media-Most group. The government has forced Gazprom to raise its tariffs and increase collections in what may be the early stages of energy-sector reform. But in relations with other former Soviet republics, Putin appears to view Gazprom as little more than the instrument of Russian power and influence that it as always been.
Despite the speed of many Putin initiatives, he has so far been slow to take on the hidden interests of Gazprom, one of the government's biggest reform problems and the one over which it should have the most control. Yuri Boldyrev's audit may have started the process, but only Putin may have the power to follow it up.
Boston, 15 August 2000 (RFE/RL) -- After months of speculation, there are signs that Russian President Vladimir Putin may be ready to crack down on the mysterious dealings of the state-owned gas monopoly Gazprom.
The Financial Times reported last Friday that Russia's state accounting chamber has been investigating a huge transaction by Gazprom's marketing partner Itera in the arctic region of Yamalo-Nenetsk.
According to a report by the state auditing agency, the regional administration sold 66 billion cubic meters of gas to Itera, apparently without charging a profit, after Gazprom paid the gas to the region's budget as a tax.
Itera then reportedly sold the gas through affiliates at rates that were in some cases more than 40 times the purchase price. An Itera official said the report did not reflect the charges that were paid to Gazprom for use of its pipelines, but the official did not say what the company's profit was.
The auditing investigation by Yuri Boldyrev, one of the founders of the Yabloko party, has been trying to answer a central question about Gazprom. Why does it channel so much of its business through Itera, a company with corporate offices in the United States.
Itera, whose offices are in the southern U.S. city of Jacksonville, Florida, has long been a focus of unanswered inquiries. The Financial Times called the company's ownership a "closely guarded secret." An Itera vice president has now promised to publish a list of shareholders in a matter of weeks.
But Itera, which was started in 1992, has already spawned 120 subsidiaries and affiliates. Previous plans have called for some to become independent. It is unclear whether the disclosures will include all the Itera entities. The Financial Times cited widespread suspicions that Itera is secretly owned by "Gazprom's management or their relatives."
The complexities of the gas deal with Yamalo-Nenetsk appear to have much in common with the transfer pricing schemes that have been used by many Russian enterprises as a legal way to avoid taxes. Under the schemes, enterprises that face high taxes can sell their goods at low prices to related companies or distributors that enjoy tax exemptions or lower rates.
While it is unclear whether the transfer of gas through a regional government fits the same pattern, the arrangement could have huge consequences for Russia and benefits for Gazprom, its biggest taxpayer. The amount of gas handled by Itera under the 1997 deal with Yamalo-Nenetsk equals one-tenth of Russia's production and five times the amount used annually by Turkey.
According to Itera, the company is supplying gas to 11 former Soviet republics. But there have been few details about its profits from doing business with Gazprom, or the costs and benefits to the Russian treasury.
Because the government owns 38 percent of Gazprom, it could be expected to benefit even if the company found a way to save on its tax payments. But if Gazprom has been shifting assets to reduce both its taxes and profits, the state may be the big loser, unless it can collect from Itera instead.
More investigations of Gazprom may be needed to convince Putin's critics that his campaign against corruption is more than a pressure tactic against political enemies. Last March, former Prime Minister Sergei Stepashin, the head of the State Duma's Corruption Commission, pledged to Western audiences that Putin would examine energy monopolies and introduce competition. So far, his moves regarding Gazprom have smacked more of manipulation than reform.
In June, Putin succeeded in ousting former Prime Minister Viktor Chernomyrdin as Gazprom's chairman. Former Deputy Prime Minister Boris Fyodorov, who has vowed to investigate Itera, was also named to the board. But so far, few details of the ties to Itera have emerged. In his recent confrontation with oligarch Vladimir Gusinski, Putin pressured Gazprom to recall its loan to the Media-Most group. The government has forced Gazprom to raise its tariffs and increase collections in what may be the early stages of energy-sector reform. But in relations with other former Soviet republics, Putin appears to view Gazprom as little more than the instrument of Russian power and influence that it as always been.
Despite the speed of many Putin initiatives, he has so far been slow to take on the hidden interests of Gazprom, one of the government's biggest reform problems and the one over which it should have the most control. Yuri Boldyrev's audit may have started the process, but only Putin may have the power to follow it up.