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Russia: U.S. Said To Be Probing Gas Trader's Dealings

U.S. investigators are reportedly asking questions in Moscow about the mysterious gas trader Itera and its ties to Russia's Gazprom. Minority shareholders are also scheduled to challenge auditing at the gas monopoly in a Moscow court this week.

Boston, 15 May 2002 (RFE/RL) -- The controversial gas trader Itera is taking a major step to boost production in Russia's Far North, but it may be one step ahead of an investigation by U.S. authorities, according to news reports this week.

"The Moscow Times" reported Tuesday that the U.S. Federal Bureau of Investigation, or FBI, has been seeking information about alleged links between Itera and Gazprom. The FBI has spoken with several Moscow investment professionals, searching for evidence of asset stripping at Russia's gas monopoly.

An analyst at the Moscow investment bank Troika Dialog said the FBI contacted him five times after he wrote a critical analysis of a Gazprom sale of holdings to Itera at bargain prices, the U.S. financial website Barron's Online reported Monday. Both the FBI and the analyst declined comment to "The Moscow Times," while Itera said it had no knowledge of the probe.

When queried by RFE/RL, an FBI spokeswoman in Washington also declined to confirm or deny the existence of such an investigation.

The reported FBI move is notable at a time when the Russian government seems to have been doing little to press questions about Itera. The company, which is registered in the southern U.S. state of Florida, has been the subject of numerous inquiries and audits for more than two years.

After its first gas deal with Turkmenistan in 1994, Itera rose quickly to become Russia's second-largest gas firm with more than 100 subsidiaries, thanks in great measure to Gazprom's beneficence. The monopoly has steered its business to Itera for trading and deliveries within the CIS, although it has its own export arm that does the same thing in deals with the far abroad.

Gazprom has also sold valuable stakes in gas businesses to Itera for as little as $1,300. A crackdown by Russian President Vladimir Putin has so far led only to the replacement of Gazprom's top management since last May and the repurchase of some of the assets sold to Itera. The government owns 38 percent of Gazprom, which holds one-fourth of the world's known gas reserves.

Itera has moved to restore the lost production from the return of Gazprom subsidiaries Purgaz and Rospan to their parent company. Last month, the Russian business paper "Vedomosti" reported that Itera would merge with Novafininvest, a producer with rights to resources in the gas-rich Arctic district of Yamal-Nenets. The obscure company has reserves of a staggering 1 trillion cubic meters of gas.

This month, the industry newsletter Petroleum Argus suggested that Novafininvest was "probably owned by Itera shareholders, believed to be former members of Gazprom's senior management." Argus said the merger was needed to offset the combined loss of 1.8 trillion cubic meters of gas from the return of assets to Gazprom and a securities ruling that blocked control of a third subsidiary.

The reason for the FBI's involvement is unclear, but there are several possibilities, in addition to Itera's base in the state of Florida.

In February, the U.S. Trade and Development Agency (USTDA) sparked protests from Gazprom minority shareholders when it announced an $868,000 grant for a feasibility study to exploit a gas field jointly owned by Itera and Gazprom. The aid was suspended after criticism that it implied a U.S. "stamp of approval" for Itera, "The New York Times" said.

A USTDA spokesman said questions had been raised about the field's ownership. "The Moscow Times" reported that Itera acquired its interest, which was valued at $500 million, for $265,270.

A further U.S. link may be the role of the accounting firm PricewaterhouseCoopers, which cleared Gazprom of illicit ties to Itera in an audit that it conducted last year. Minority shareholders objected to the choice of PricewaterhouseCoopers to investigate the connection because it has served as Gazprom's auditing firm since the mid-1990s. U.S. regulators have paid close attention to auditing practices since the collapse of the U.S. energy-trading giant Enron last year.

On Monday, Gazprom announced that it planned to name PricewaterhouseCoopers as its auditor yet again for the coming fiscal year, drawing more protests from William Browder, chief executive of Hermitage Capital Management, a minority shareholder.

Browder has filed a series of lawsuits challenging the audits. The first is scheduled to come before a Moscow court this week.

Gazprom's foreign shares are traded on the U.S. over-the-counter market, giving U.S. authorities another reason to investigate.

It is possible that the FBI may also be helping Russia to gather evidence for a further crackdown of its own. In February 2001, the U.S. General Accounting Office offered to help the Audit Chamber of the State Duma in a joint audit of the relationship between Gazprom and Itera, but it is not clear that any action was taken.

So far, Putin has seemed content to install loyalists in Gazprom management, while keeping Itera on the defensive. But he has yet to provide answers to the persistent questions about asset stripping, and the FBI inquiry may be just another chapter in the mystery.