>From Johnson's Russia List. Gangster capitalism at work.
Cheers, Ken Hanly
Foreign shareholders in natural gas monopoly Gazprom are up in arms about a
once little-known company called Itera. And rightly so.
The foreigners, who are thought to hold about 20 percent of Gazprom, have
sunk untold hundreds of millions of dollars into the company and fear that
Itera will drastically weaken returns on their investments.
Nothing is known about the ownership of Itera, which was registered in 1992
in Jacksonville, Florida, and initially distributed food and oil products.
The company teamed up with Gazprom in 1994 to handle gas deliveries and has
since then shot up to become the third-largest gas producer in Russia.
Gazprom has farmed out to Itera billions of dollars worth of work.
Furthermore, Itera appears to have acquired a number of mammoth gas fields f
most recently five in the Yamal-Nenets Autonomous District f with the aid of
Gazprom. The Financial Times reported that Itera snapped up many of its
fields after Gazprom bankrupted the former operators by charging huge
tariffs
for access to pipelines.
Gazprom and Itera, while providing few details, say their alliance is above
board. Gazprom says it handed over work to Itera in order to focus more on
its domestic and Western European activities.
Shareholders worry that a form of asset-stripping is going on, and are
demanding that Gazprom management account for their relationship with Itera.
Oil analysts speculate that Itera may be owned by Gazprom management or
their
relatives.
And why not? Gazprom managers and their relatives own at least 60 percent of
Stroitransgaz, a pipe construction company with about $1 billion in
outstanding orders from Gazprom, according to Business Week.
Stroitransgaz also managed to acquire a 4.8 percent stake in Gazprom for
only
$2.5 million, while Gazprom's main foreign investor, Ruhrgas of Germany,
paid
about $910 million for its 3.5 percent stake.
As the world's largest gas producer, Gazprom should be earning enough to
upgrade, expand and offer attractive dividends. Instead, the company
complains that it is too cash-strapped to grow alone.
In June Gazprom signed a deal to develop a field with Royal/Dutch Shell, and
on Monday announced the two companies would now work together to boost
exports.
Unclear alliances and companies owned by unknowns were common in the 1990s,
and investors often let such matters slide when there were profits to be
made. But those days are over for any company determined to win investor
confidence.
Gazprom has a lot of explaining to do if it wants to be taken seriously in
the West.
