Gazprom of Russia

Gazprom is the most powerful company that you’ve probably never heard of. The company is Russia’s state-controlled natural gas monopoly. Imagine if the KGB went into the energy business, and you have a good idea of what Gazprom is all about. Basically, these boys don’t like to lose. While everything else is falling apart in Mother Russia, Gazprom is raking in the bucks. For the most recent quarter, profits rose 34%. And if the price of natural gas keeps rising, Gazprom will become even more powerful.
Gazprom is easily one of the most important institutions in Russia today. The company accounts for 8% of Russia’s GDP, and an astounding 25% of its tax revenue. The government recently upped its stake in Gazprom to 51%. The company provides natural gas to Russians at break-even prices, and it makes a profit though exports to Europe.
Earlier this year, Gazprom got into a nasty fight with Belarus. The company demanded that Belarus sell them a pipeline operator for $1 billion. The government in Belarus thought it was worth five times that much. So Gazprom made them an offer they couldn’t refuse: They shut off all gas supplies to Belarus in the middle of winter. Yep, these guys are Disney-level evil.
When Putin got elected, he promised to clamp down on the oligarchs that dominated Russian industry. Today, the oligarchs are either in jail or they’ve fled the country, and they’ve been replaced by state-owned enterprises. In other words, the Kremlin. (The Economist has an article about the current level of corruption in Russia.)
Earlier this year, the CEO said that he wanted to make Gazprom the world’s largest energy company. The company already has more hydrocarbon reserves than ExxonMobil, Royal Dutch Shell, British Petroleum, Total and Conoco Phillips put together. They’ve even buddied up with Hugo Chavez. Gazprom recently won development rights to Venezuela’s off-shore oil fields.
The company just bought Sibneft, an oil company, for $13 billion. Ranking behind only Saudi Arabia and Iran, Gazprom is now the third-largest owner of oil in the world. Sibneft’s owner, Roman Abramovich, walked away with $9 billion. Contrast that with the former head of Yukos, Mikhail Khodorkovsky, an oligarch who openly criticized the Kremlin. He’s currently sitting in jail for tax evasion.
I guess you could say that what’s good for Gazprom is good for Russia.

Posted by on October 25th, 2005 at 4:22 pm


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