Russian Government Seen as ‘Under the Control of Gazprom’

The situation surrounding the approval by the government commission on the fuel and energy complex of the program elaborated by Gazprom and the Ministry of Energy and Industry for a unified system of gas extraction in the Far East — the so-called Eastern Program — has become exceptional even for the current style of Russian state companies’ relations with the government and the law. The debate on the state strategy was used as a pretext for demanding from the government a sharp increase in (Gazprom’s) own resources base in circumvention of current legislation.

Aleksandr Ananenkov, deputy chairman of the monopoly’s board, who is standing in for company head Aleksey Miller, who is in hospital, stated officially for the first time that the company expects to acquire the reserves of the Chayandinskoye deposit in Yakutia and of Sakhalin-3 without competition (since 2007 the law has made no provision for licenses to be passed to companies without auction or competition).

Bearing in mind the control already obtained over the Sakhalin-1 project and the imminent completion of the procedure of withdrawing TNK-BP’s license for the Kovyktinskoye deposit (also involving the use of administrative resources), Gazprom will acquire an absolute monopoly on the exploitation of mineral resources in the Far East. Not as project operator, moreover, but as owner of the deposits. To some of which, by the way, Gazprom’s main political enemy — the Rosneft company — aspires (this applies to Sakhalin-3).

Gazprom explains its proposal in terms of “state interests.” It turns out that, under an agreement with South Korea, from 2012-2013 Gazprom is expected to supply that country with 10 billion cubic meters of gas per year, but the means of delivery is not specified. Gas can be delivered to Korea only through the Khabarovsk-Vladivostok pipeline, which Gazprom structures will complete construction of by 2011. However, according to Mr Ananenkov, “there is no resources base for the gas pipeline” — not only for South Korea but also for Vladivostok. The Eastern Gas program, which was approved by the government commission on the fuel and energy complex, has been being written by Gazprom since 2004. Gazprom is a state company and could not have concluded agreements on gas deliveries to South Korea without the knowledge of the government. It turns out that a state company signs a long-term gas-supply contract with a foreign state, while concealing from its own state that it does not have the capability to meet the contractual commitments. It then demands the status of absolute monopoly in one of the country’s most promising gas regions.

Ananenkov’s stated motivation is not directly linked to Gazprom’s demand for the Chayandinskoye deposit to be transferred to its books. The company itself does not plan to start extraction there before 2016, so this has nothing to do with the agreement with South Korea and Vladivostok. More importantly, though, a major state company is not only a state within a state with capabilities that exceed those of the government, but is also in effect resolving its own commercial problems by means of that government.

Not only is Gazprom not under the control of the state, the state in the form of the cabinet turns out to be under the control of Gazprom.

In such a situation Russia’s attempts to base its foreign policy on the idea of energy empire and the use of energy supplies as a means of pressure on suppliers (as published) seem extremely unsound. Can a country be regarded as a reliable energy supplier if its main state monopoly, in concluding contracts with other states, knowingly (in order to get hold of new deposits) or unknowingly omits to calculate the resources base necessary to fulfill its commitments?

It is obvious, in any case, that Russia’s key, officially state-controlled companies are openly using state institutions for their corporate purposes.

The government in its current composition and with its current powers has not the slightest possibility of bringing the situation back within the bounds of the law and common sense.

Six months before the elections, with the future of the regime undecided, even once ambitious administrators and ministers prefer to bide their time and not spoil their relations with influential corporations and the Kremlin leadership. On the contrary, it is better to offer certain services in the hope that they will be taken into account subsequently.

All the talk about energy empire or global energy security is merely a cover for a carve-up of mineral resources among conflicting Kremlin groupings.

 

Gazeta.Ru June 20, 2007

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