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Russia: Government Backtracks On Gazprom Reform

Despite plans for restructuring Russia's Gazprom, government officials now say the company will keep its monopoly over the country's natural gas exports. A promise to increase foreign shares is also in doubt, raising questions about backtracking on reform plans. Our correspondent Michael Lelyveld reports.

Boston, 10 August 2001 (RFE/RL) -- Russia's will to reform the gas giant Gazprom seems to have weakened in the past week, despite pledges that its pipelines would be opened to independent oil companies.

Speaking on 6 August in Istanbul, Deputy Prime Minister Viktor Khristenko said the government plans to keep Gazprom's monopoly over gas exports intact, even after a restructuring plan takes effect.

Khristenko said, "Gazprom's position on the external market represents the consolidated position of the whole country."

He added, "There is no such aim as a Gazprom restructuring for restructuring's sake," the Reuters news agency reported.

The remarks about exports produced headlines that suggested little change in Gazprom's influence and its ties to the government, in spite of restructuring plans announced by Prime Minister Mikhail Kasyanov on 11 July.

A headline in "The Moscow Times" read: "Khristenko: Gazprom to Stay Monopoly." The RIA-Novosti news agency wrote: "Russia Will Preserve a State Control over Gas Exports."

The reform plan last month had one major feature. Kasyanov said the government would split Gazprom's production unit from its pipeline network, allowing access for other Russian sources of gas. The news drew cheers from Russian oil companies, which have been unable to reach profitable markets with the gas that they find.

Last month, the head of the Russian oil company Yukos, Mikhail Khodorkovsky, said enthusiastically: "We will start developing gas fields at an accelerated pace. Gas production in Russia will increase, and gas costs will go down."

But the plan has been haunted by a nagging question from the start. Western analysts assumed that the government meant to give the oil companies access to the pipelines for export, while Gazprom wanted the independent gas to go only to the Russian market.

The difference is a matter of profit and price. Gas sells in Russia for about $15 per thousand cubic meters, less than half the cost of buying it from countries like Turkmenistan. Gazprom has sold its gas in Europe for over $100 per thousand cubic meters.

Khristenko's statement means that Gazprom will continue to monopolize Russia's gas sales on world markets, while Russian oil companies will be able to sell only at home, where tariffs are controlled. The government plans to raise domestic prices, but the process could take years if inflation and the economy stand in the way.

Khristenko was not encouraging about the pace of change. He reportedly said that restructuring would take "a long time" and that details would become clear when plans for the domestic market are approved, perhaps by the end of the year.

The statements may disappoint those who expected a new era at the world's largest gas company after President Vladimir Putin named former Deputy Energy Minister Alexei Miller as chief executive in May.

Since then, Gazprom insiders have argued that the company is too important to the government to lose its control over exports. The government owns a 38 percent interest in Gazprom and appoints a majority of its board.

In an interview with the "Petroleum Argus" newsletter last week, Gazprom board member and head of international relations Yuriy Komarov was asked whether the company still opposed access for independent producers to its export pipelines.

Komarov answered simply, "I think that Russia will keep the single-operated export system." Khristenko's statement makes it appear that Komarov was right.

Investors and financial analysts have focused on promises that the government will end the two-tiered system that requires foreigners to pay more for a special class of Gazprom shares. Stock prices jumped in April after Putin announced that the cap on foreign ownership of Gazprom would be raised from 20 to 40 percent.

But even that pledge seems to be subject to revision.

On 8 August, Gazprom board member Alexander Semeniaka, a member of the working group named by Putin to consider the question, said: "Our work is based on existing mechanisms. Currently, the talk is about the first stage of liberalization, and the 20 percent quota for foreigners will remain," Reuters reported.

In spite of the many announcements of change this year, the plans for Gazprom seem to be growing less ambitious with time.