The Ministry of Property Owns 38.37% of Gazprom shares, another 0.9% is owned by the state-owned company Rosgazifikatsiya, and 15.11% at the beginning of the year was controlled by Gazprom itself through its subsidiaries. Of these, the main holders were Gazprom Finance BV (4.58%), Gazprom's pension fund (4.70%), and Gazprombank (1%), while Gazprom controls another 4.83% of its shares through Gazprominvestholding. However, according to one of Gazprombank's managers, by June the bank had increased its stake to almost 2%. If this is true, the state controls 55.38% of Gazprom shares and will retain control even if ADS are issued. However, the gas monopoly employee noted that Eurobonds "do not necessarily have to be converted, they can be bought out for money." Renaissance Capital analyst Adam Landes believes that Gazprom could raise $2 billion through Eurobonds. And Aton analyst Timerbulat Karimov believes that such Gazprom securities will be of interest to foreign investors, especially due to the possibility of converting them into ADS. On Friday, Gazprom ADS quotes on the Frankfurt Stock Exchange rose by 3.27% and the closing price was 15.8 euros.

Already this year, 4.58% of Gazprom shares may be sold on the foreign market through convertible bonds. Having spent money on consolidating shares in the interests of the state, Gazprom is now lobbying for the rapid liberalization of the market for its shares.

As Craig Kennedy, executive director of Morgan Stanley (the company advises Gazprom on financial issues), told Vedomosti, the monopoly plans to issue convertible Eurobonds against a block of shares owned by Gazprom Finance BV. This Dutch subsidiary of Gazprom holds 4.58% of the monopoly's shares. ADSs could be issued for these securities at any time, Kennedy says.

Gazprom Chairman of the Management Board Alexey Miller said at a press conference on Friday that he could not yet say anything about the possibility of issuing Eurobonds for 4.58% of Gazprom shares. However, according to information from a source in Gazprom to Reuters, the monopoly wants to issue Eurobonds before the end of 2003. After all, Gazprom's government permission to withdraw 4.58% of shares to foreign markets is valid until the end of the year. For now, the share of foreign Gazprom shareholders is limited to a quota of 20%, and government permission must be obtained for each sale of shares to foreigners. According to Gazprom itself, foreign owners currently own 11.5% of the monopoly's shares.

However, in the event of the conversion of Eurobonds into ADS, the state-controlled share of the monopoly's shares will decrease by 4.58%, while maintaining state control over Gazprom is one of the conditions for the liberalization of the monopoly's share market.

But, judging by Alexey Miller's speech at the press conference, foreigners will soon have additional opportunities to purchase Gazprom shares. Miller reported that the company has submitted new and specific proposals to the government and the presidential administration on liberalizing the stock market. "We can hope that the issue of liberalizing the Gazprom stock market will now be on the agenda [of the government and the president]," the Gazprom CEO is confident.

A source familiar with the monopoly's proposals to liberalize the stock market told Vedomosti that the first stage proposes creating a unified trading system and depository accounting for the monopoly's domestic shares. Gazprombank is proposed to be the custodian, and its subsidiary, a settlement and depository company, or the Depository and Settlement Union, the settlement depository, or to merge them. Then the change of securities' owners will become absolutely transparent and it will be easier to track foreign shareholders at the second stage of liberalization, says Vedomosti's source. At the second stage, foreigners will be able to buy shares on the domestic exchange market (within the 20% quota), but will not be able to dispose of them. Purchased securities will be automatically deposited in ING's Russian subsidiary, a nominal holder for the Bank of New York under the ADS program. And BoNY will credit the ADS to the accounts of new shareholders.

A Gazprom employee, who asked not to be named in print, confirmed to Vedomosti that the monopoly has such plans.

Gazprom is preparing to sell its shares