Date
Author
Яна ВИКТОРОВА; Николай ГОРЕЛОВ; Алексей ГРИВАЧ; Андрей ДЕНИСОВ
Source
Preserved copy
Translated material
The reform that was lost
Operation "Inventory"
The change of management at Gazprom, which took place in May 2001, seemed to many to be a sign of an imminent restructuring of the monopoly. However, the arrival of the unknown Putin Alexey Miller did not live up to these expectations: the management of Gazprom has been and remains the main opponent of the changes all these years. The reason for the fierce resistance to the demonopolization of the gas industry and the inevitable restructuring of Gazprom itself, apparently, is the fear of its “curators” of losing control over the financial flows and administrative capabilities of Europe’s largest concern.
With some degree of convention, three main attempts can be identified to begin reforming Gazprom. The first of them was the most daring (which is why it almost turned out to be effective) and happened in the first year of Vladimir Putin’s presidency. In the last days of December 2000, Prime Minister Mikhail Kasyanov signed a decree “On state regulation of gas prices and tariffs for services for its transportation in the Russian Federation.” The document envisaged a real revolution: to separate the gas sales market from the Gazprom system, transferring it into the hands of private reseller companies not associated with the gas monopolist. According to the decree, the state was supposed to regulate only wholesale prices for gas, tariffs for its transportation through highways and gas distribution networks, and retail prices for the population. Other retail prices could be freely set by independent resellers. It was proposed to begin the reform itself in the second or third quarters of 2001 and carry out it in two stages: first, to create several companies independent from Gazprom that transport the gas of the concern, and then to continue liberalizing prices, gradually limiting the scope of state control over the gas industry. But this resolution remained on paper.
At one of the closed meetings in the Kremlin with the participation of Mikhail Kasyanov, German Gref and Alexei Miller, recently appointed to Gazprom, Vladimir Putin ordered that the restructuring of the gas industry be abandoned. The argument for stopping the discussion on this matter, which had not yet begun, was the task assigned to Mr. Miller to conduct an inventory of the farm entrusted to him in order to determine what would need to be reformed.
So Gazprom began to pursue a policy to strengthen its monopoly.
Return to the past
The inventory of assets has grown into the return of lost businesses. In the fall of 2001, at a meeting in Novy Urengoy, Vladimir Putin scolded Mr. Miller for taking away assets from under his nose, pointing to the petrochemical holding SIBUR. Gazprom's management immediately took the stand. For the director and co-owner of the holding, Yakov Goldovsky, the story ended with many months of imprisonment and loss of business. And the monopolist, who had acquired a taste, could no longer be stopped: a controlling stake in Purgaz, which produces 14 billion cubic meters of gas per year at the Gubkinskoye field, was bought from Itera for $200 million, control over Zapsibgazprom was restored and the license was returned to its balance sheet to the Yuzhno-Russkoye field with reserves of 600 billion cubic meters. Then Gazprom took over Northgas, which produces about 5 billion cubic meters at the North Urengoy field. So far without success: over the course of a year he has not been able to prove in court that he lost a controlling stake in this company through illegal means.
At the same time, the monopolist formed a “gray” system of “authorized traders.” Only they could gain access to Gazprom's gas pipeline system. And independent producers, who do not have this opportunity, are forced to sell most of the gas directly at the well. This is evidenced by the fact that independent gas producers sold no more than a third of their gas last year. The rest went through intermediaries favored by Gazprom. This practice led to an even stronger monopolization of gas sales.
Finally, under the motto of the return of assets, last year the operation of Gazprom’s accession to the CIS gas markets was actually completed. From there, Itera was successfully ousted, which, under Rem Vyakhirev, the monopolist himself authorized to work in these problematic markets at that time.
One and indivisible
In 2002, when the new management of the concern had already mastered the gas business, achieved the first successes in returning lost assets (at the cost of incredible efforts) and dealt with the remnants of the Vyakhirev administration, the discussion on gas reform began to revive. However, the second attempt by supporters of reforms in the industry failed: the issue did not even reach discussion in the cabinet of ministers, although it managed to appear on the agenda. On the eve of a government meeting at the end of December 2002, Alexey Miller wrote a heartbreaking letter to Vladimir Putin about the possible dire consequences of the development of the gas market in Russia if German Gref’s plan is adopted. The Minister of Economic Development and Trade proposed separating the transport infrastructure from Gazprom into a separate company, gradual demonopolization of exports and measures to increase competition in gas production. And the president gave Mikhail Kasyanov instructions to deal with the situation in such a way that Messrs. Gref and Miller did not conflict. In practice, this meant a recommendation not to force events.
The third attempt by reformers to start discussing the issue in September last year exactly repeated the previous one: Alexey Miller again painted a terrible picture of the head of state and the issue was again excluded from the agenda of the government meeting.
Vladimir Putin for the first time loudly and clearly voiced his opinion on the situation in the industry at the solemn celebration of the tenth anniversary of Gazprom in the Kremlin. In fact, he promised to keep the company intact: “The state will not support any plans for the dismemberment or division of Gazprom.” The reformers had to be content with another remark from the president: “The opacity of Gazprom can seriously affect the attraction of investments in this industry, it is necessary to change the situation with the company’s closure.” And a little later, the European Commission received an uncompromising answer, setting the elimination of the monopoly as a requirement for Russia’s accession to the WTO. “We will not divide Gazprom,” Putin said on October 9 in Yekaterinburg at a meeting with German Chancellor Gerhard Schröder. And he advised the European Commission to get rid of illusions - “in the gas sector, they (Europeans) will have relations with the state.”
Batch Control
With the same success, in the first four-year plan of Vladimir Putin, the situation with the liberalization of the Gazprom share market developed. The president and his team failed to cope with another “relic of the past” - restrictions on free trade in shares of the gas monopoly. Although loud promises were made with enviable regularity.
The division of the Gazprom stock market was introduced by presidential decree No. 529 of May 28, 1997. According to it, foreign legal entities and companies in which more than a third of the seats in the management bodies or more than 50% of the authorized capital belong to non-residents cannot acquire Gazprom shares without the permission of the Federal Securities Commission. The same decree introduced a restriction on the participation of foreigners in the authorized capital of Gazprom in the amount of 9%, but the law on gas supply in the Russian Federation adopted in 1999 increased this share to 20%. Currently, Gazprom shares are distributed as follows. The government owns 38.37%, Gazprom itself and its affiliates - 17.33%, Russian individuals - 15.1%, Ruhrgas - 6.5%, 3.42% are traded in the form of ADS, state enterprise "Rosgazification" - 0.9%. The remaining shares are owned by Russian legal entities.
At the beginning of April 2001, the deputy head of the Kremlin administration and concurrently the chairman of the board of directors of Gazprom, Dmitry Medvedev, on behalf of the president, headed a special working group whose goal was to find a mechanism for liberalizing the market for Gazprom shares. Vladimir Putin gave the team, which included Deputy Prime Minister Viktor Khristenko, head of the Federal Securities Commission Igor Kostikov, presidential adviser Andrei Illarionov, Gazprom representatives Sergei Dubinin and Alexander Semenyaka and others, a short period of three months. Five months later, the Medvedev group proposed to gradually abolish the division of the market into internal and external within the framework of a 20 percent quota for the participation of foreigners in the authorized capital of the gas monopoly, but the group members were still able to choose one optimal one out of four specific mechanisms developed. The report was presented to the president, and the matter was postponed.
In subsequent years, officials at various levels used the topic of liberalizing the circulation of Gazprom shares for “speculative” purposes: from time to time declaring that a decision was about to be made, they heated up the market. And the company’s management, headed by Alexey Miller, apparently was given the political task of ensuring that the stakes owned by the state and the corporation together amounted to more than 50%. He coped with this task.
At the beginning of November last year, almost immediately after the arrest of Mikhail Khodorkovsky, the president himself told investors about the imminent liberalization of the Gazprom share market (however, he outlined the timing very vaguely, designating them as “near future”). There was a hint of healthy skepticism from the investors’ reaction: the company’s shares, which are traded on Western exchanges in the form of ADS (and should fall in price after liberalization), after the announcements grew faster than “domestic ones”.
Waiting for an impulse
As a result, the discussion of the future configuration of the gas industry that never took place will fall to the new government. The complete failure of gas reform during President Putin's first term occurred with his direct participation. At the same time, the obvious flaw in the coordinate system in which the gas business is currently conducted in Russia is a complete lack of investment attractiveness, the colossal dependence of the business on the monopoly, the lack of incentives to improve the efficiency of Gazprom, etc. -- becomes a real threat to the country. The Soviet safety margin was almost completely “eaten up” back in the Vyakhirev era. Now the profitability of Europe's largest corporation is directly dependent on export prices. However, if they suddenly fall, Gazprom and the industry as a whole will find themselves in a very difficult financial and economic situation.
Therefore, it cannot be ruled out that reforms in the gas industry will receive a strong impetus in the next four years. In this case, Gazprom’s management will be left with two options: free up seats for a stronger management team or propose its own constructive program for reforming this sector of the economy. The first option is not politically beneficial to Vladimir Putin, and the success of the second so far looks doubtful.
Chronicle
On December 29, 2000, Prime Minister Mikhail Kasyanov signed a decree “On state regulation of gas prices and tariffs for gas transportation services in the Russian Federation,” which provided for a radical restructuring of Gazprom. It was proposed to begin the reform in the second or third quarter of 2001 and carry out it in two stages.
On April 3, 2001, Vladimir Putin said in his message to the Federal Assembly that “it’s time to put an end to the financial opacity and ineffective management of Russia’s natural monopolies,” in particular in the electric power industry, the fuel and energy complex, and railway transport.
On May 30, 2001, the Gazprom board of directors did not renew the contract with the chairman of the board, Rem Vyakhirev, who had led the company for nine years. Deputy Minister of Energy Alexey Miller was appointed to this position.
In August 2001, at one of the meetings with Vladimir Putin with the participation of Alexei Miller and German Gref, it was decided to postpone the reform for a year.
On December 26, 2002, at a government meeting, the concept of gas market development was to be considered. Late the night before, the issue was removed from the agenda at the request of Vladimir Putin.
On February 10, 2003, Vladimir Putin, at the official celebration of Gazprom’s tenth anniversary, said that the state would not support any plans to “dismember” the company.
On March 19, 2003, Mikhail Kasyanov held a meeting on gas reform, at which he instructed Gazprom and the Ministry of Economic Development to present agreed proposals for the development of the gas market.
On September 16, 2003, the Ministry of Economic Development submitted to the government an updated version of the gas market development concept. Gazprom presented a critical review of it and asked Mikhail Kasyanov to remove the issue from discussion.
On September 25, 2003, the government decided to postpone the meeting on the gas issue for one day.
On September 26, 2003, at the request of Vladimir Putin, the discussion of gas reform was removed from the agenda of the government meeting.
On October 9, 2003, EU Trade Commissioner Pascal Lamy, during the next round of negotiations on Russia's accession to the WTO, put forward demands for the restructuring of Gazprom as one of the main conditions of the European Union. In response, Vladimir Putin accused Brussels of “arm twisting” and said that he would not allow any division of Gazprom.
January 2004. A schedule for the government's work in the first half of 2004 has been formed, according to which the issue of developing the gas market in Russia will be considered at one of the May meetings.