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Russia: Government Again Delays Gazprom Reform

The Russian government appears to be putting off reforms at the Gazprom gas monopoly after a change in management at the company last month. The decision marks the second delay in the past year, raising doubts about the government's ability to act.

Boston, 14 June 2001 (RFE/RL) -- Like a memory that fades into the past, Russia's plan to reform the gas monopoly Gazprom seems to be fading into the future.

Last week, Prime Minister Mikhail Kasyanov said that work on a plan for the gas sector would not start until the fall and that implementation would be pushed back at least to the first half of next year.

Kasyanov said, "We cannot be in a hurry to reform the gas industry, the most sensitive of all our monopolies," Reuters reported. "Before we solve the problem, we must have a clear understanding of what problems we shall not be able to solve. We need to analyze the question thoroughly."

Although Kasyanov promised last year that an overhaul of the world's biggest gas company would start in 2001, his latest comments were nearly identical to those made six months ago, when he announced a previous delay.

In December, Kasyanov said: "Gazprom is the biggest corporation in Russia, the 10th major in Europe and makes about 30 percent of all federal budget revenues. That is why a delicacy is required here." The prime minister added that a reform plan "may lead to groundless disturbances."

Since then, nothing has disturbed the secretive workings of the monopoly, which is 38 percent state-owned.

Kasyanov's reluctance to consider change at the gas giant is less remarkable than that of the government as a whole. Last month, President Vladimir Putin raised hopes when he replaced Gazprom's longtime chief executive -- Rem Vyakhirev -- with Aleksei Miller, a young deputy energy minister.

But Gazprom insiders have apparently been told that they can go on much as before.

Last week, Gazprom Deputy Chief Executive Vladimir Rezunenko told the Associated Press, "We already had a discussion with Aleksei Miller and he confirmed the adherence of the general line of Gazprom in all our projects."

Last Friday, Miller met with a group of shareholders but confined his remarks to broad assurances. Miller said, "The state as a major shareholder of Gazprom wants to raise the company's profitability and capitalization. Therefore, your interests correspond to those of the state."

Miller added, "We will strive to raise the company's capitalization...make its expenditures more transparent...and we pledge to fulfill all our contract obligations."

But there was no sign that Miller plans to shed light on reports of alleged asset-stripping at Gazprom, its shadowy ties to gas trader Itera, or its operations in the near abroad, where it acts in the foreign policy interests of the Kremlin rather than as a commercial company.

So far, the major change since Miller took charge is a plan to encourage gas production by independent Russian oil companies. Most have been burning off the gas that they find because Gazprom controls Russia's pipelines.

But Gazprom officials have said that they only want the companies to sell their gas on the domestic market, where prices are low. That would free Gazprom to export more of its production in Europe, where prices are high.

Foreign investors have continued to focus on concerns about the low prices of the Gazprom stock that they are permitted to trade. Last week, financier George Soros presented a plan that would give traders a way to overcome the "ring-fence" that bars foreigners from buying Gazprom's domestic shares.

But the issue may have little to do with all the problems facing Gazprom. The company's gas output has been stagnant due to lagging investment and incentives. Last week, officials indicated that there are no plans for any major increase.

Gazprom exports about one-fourth of its production. To keep output from falling, it will have to raise domestic tariffs to create incentives and efficiency. But the government has not even started to deal with the question of how fast it can move without affecting consumers and the economy.

So far, there seems to be less concern about reform and more worry about a disturbance for Gazprom and the trouble that it could cause for the government.