EDITORIAL: $175,000

EDITORIAL

$175,000

As of the last tax year, that was the sum in Russian “president” Dima Medvedev’s bank account.  It had doubled compared to the year just before he became “president” of the country, although his salary in the intervening three years remained constant and was far lower than he received as the top executive at Gazprom, Russia’s largest business entity.  Medvedev’s income remained, laughably, far less than that of Russia’s “prime minister” Vladimir Putin.  Two years ago Medvedev’s wife had 50% more than that in her own bank account.  Now, she has nothing. When asked what happened to the money by a Russian financial newspaper, the Kremlin refused to say.  In a recent survey, over 75% of Russian respondents said that Medvedev, like all Russian officials, was lying when he reported his income last year.

EDITORIAL: The Russian Hallucination

EDITORIAL

The Russian Hallucination

Russia’s most valuable company, Gazprom, has a market capitalization about $150 billion.  That seems impressive, until you know that Exxon, America’s most valuable company, has a market capitalization more than double that of Gazprom.

Flip your perspective, and you see something even more amazing. Gazprom’s value constitutes more than ten percent of the total gross domestic product of Russia.  Exxon’s value? It’s less than two percent of America’s GDP.

In other words, because the American economy is ten times larger than Russia’s, Exxon can fail and America will go merrily on, almost oblivious. But if Gazprom fails, Russia crashes into poverty and absolute collapse. And competing head to head in Russia’s area of greatest strength, America still wins hands down, in dominating fashion.

How is it, then, that Russians dare to continue to adopt such a provocative and hostile attitude towards the USA?

The Day Russia turned out the lights

The brilliant Vladimir Kara-Murza reports:

If one were to name a particular date when Russia’s nascent democracy succumbed to Vladimir Putin’s authoritarian regime, April 14, 2001 would be a fairly good contender. Ten years ago the Russian government, using the state-owned energy giant Gazprom as its proxy, seized control of NTV—the country’s largest and most popular independent television channel. There were, of course, other significant dates: June 22, 2003 (the government-ordered shutdown of TVS, Russia’s last independent television channel), October 25, 2003 (the arrest of oil tycoon and opposition supporter Mikhail Khodorkovsky), December 7, 2003 (the expulsion of pro-democracy parties from Parliament in heavily manipulated elections), December 12, 2004 (the abolition of direct gubernatorial elections—ironically, signed into law by Mr. Putin on Constitution Day). But it was the takeover of NTV that was, in many ways, the point of no return.

EDITORIAL: What can Russia Do About it?

EDITORIAL

What can Russia Do About it?

Scholar Paul Goble points to an important bit of analysis by Valery Bondarenko on the Imperia website which highlights Russia’s foreign-policy impotence even in its near abroad.  What can Russia really do, Bondarenko asks, to rein in the actions of countries like Belarus, Ukraine and Moldova if they choose to go their own way, independent of Russia?

Next to nothing, he answers.

EDITORIAL: The Putin Economy in Shambles

EDITORIAL

The Putin Economy in Shambles

We learned last week that merger and acquisition activity in Russia fell a shocking 62% last year.  Activity in the areas of consumer goods and retail, financial services and metals and mining was even worse, down a devastating 80%.  Investors spurned Russian risk with a furious vengeance, and for this same reason the Russian stock market’s value remains utterly puny compared to the theoretical value of the assets it represents.

The world, you see Mr. Putin, is getting wise to you.

Gazprom, on its Knees

Streetwise Professor reports that once-mighty Gazprom has come upon mighty hard times:

The last couple of days I’ve felt that when I wrote “Teleconnections” I was like that guy in the TV show “Early Edition” who got the paper (the Chicago Sun Times) delivered to him before it was published.  Yesterday Bloomberg had an article about a shale gas bonanza in Europe; today’s WSJ has an article describing how Italian energy firm Eni has renegotiated its contracts with Gazprom, as I suggested would happen in the post, because (a) oil prices and gas prices have delinked, due in large part to increased non-traditional supplies, and (b) the development of LNG has helped spur development of a spot market for gas:

Gazprom and the Stasi

Roman Kupchinsky, writing for the Jamestown Foundation’s Eurasia Daily Monitor:

Gazprom’s extensive network of loyalists, often act as “men of sacrifice,” devoted to cleansing the image of the Russian state owned gas monopoly. Working out of a modern office building in Berlin owned by Gazprom Germania, a German registered company fully owned by Gazprom Export which, in turn is run by Gazprom, they have built up a considerable empire for the Kremlin. In turn they are being whitewashed by other loyalists in the offices of Brussels-based PR firm GPlus Europe.

Putin is Destroying Gazprom

The New York Times reports:

As energy markets shrink, the same tactics that the Kremlin used to build Gazprom, the giant energy company, into a fearsome economic and political power that could restore Russian influence in the world are now backfiring, slashing both its profits and its influence.

EDITORIAL: Here we Go Again

EDITORIAL

Here we Go Again

Russia’s foreign currency reserves are back in freefall, and Russia’s largest company, Gazprom, is withering like a raisin in the sun.  Welcome to the horror that is government by KGB spy.

EDITORIAL: USA Dominates Russia

EDITORIAL

USA Dominates Russia

One of the least-noticed facts about Russia by those who call themselves her “defenders” is that each year the USA and Russia produce virtually the same amount of crude oil.  Russia generates an income stream in foreign currency from its production which America lacks only because the American economy, immeasurably more potent and powerful than Russia’s, uses all of the country’s supplies for manufacturing and more, making huge purchases on the international markerts, while Russia is able to use only a tiny fraction of the oil it produces in its anemic, pathetic neo-Soviet industrial base.

And that’s only the tip of the iceberg.  Russia also manages the economic energy it does manage to generate far, far worse than America does, leading to anemic performance that bespeaks the total lack of credentials wielded by the clan of KGB spies that govern Russia.

No clearer illustration of this, for Russia, bitterly harsh reality could be offered than to compare America’s Exxon-Mobile with Russia’s Gazprom.   Exxon posted a record profit of $45 billion in 2008. Its fourth-quarter results were down because of falling prices for crude oil, but just 33%, and it rose to the top of Fortune 500 for the year.  And Gazprom?  Russia’s entry in the competition, a monopoly run by the Russian government itself, saw its profts fall by a whopping, truly breathtaking 84% in the fourth quarter of last year.  Its total profits for the year were less than $30 billion,  one third less that of Exxon Mobile, a single private American firm, and well below the market’s expectations.

This pure domination continues in the wider economic picture.

One Photo is Worth a Thousand Putin Screams

If we told you that one of these two men is Gazprom chief executive Alexei Miller, and the other is the head of Ukraine’s gas company Naftogaz, Oleh Dubyna, and told you they were watching officials exchange documents at the Gazprom headquarters in Moscow on Tuesday after the “gas war” between their two countries ended, you’d know instantly which man represented the winning country, woudn’t you?  That would of course be the smiling man on the left — namely Mr. Dubyna.  Photo from the Moscow Times. Another Putin scheme goes down in flames. Nice scowl there, Alexei.

Horsepower for Gazprom

An equine solarium

Novaya Gazeta reports:

Gazprom’s website has published a request for bids. It’s soliciting a contract for the supply of equipment to its equine stables in the village of Bogorodskoye, in the Leninsky District of the Moscow Region.

The company is requesting the installation of a Warendorfer Standard II Solarium with a set of built in thermal showers, to be completed by the end of this year, with a maximum contract price of 338,000 rubles (roughly $12,000). Only experienced tradesman are solicited.          

EDITORIAL: Much ado about Gazprom

EDITORIAL

Much Ado about Gazprom

Is Gazprom a tempest in a Russian teapot?

Blogger Robert Amsterdam points to a recent post on the EU Energy Policy Blog that shows Russia’s power in Europe is far less than some like to imagine.  According to the article, natural gas only accounts for 25% of Europe’s energy consumption, and Russia’s share of Europe’s imports of gas, as shown in the table above, has been precipitously declining as Europe’s energy usage has increased.  Indeed, in the past two decades Europe has slashed its reliance on Russian energy by half.  The report states:  “Since 1990, 80% of the growth in European gas imports has originated from countries other than Russia, especially Norway, Algeria, Nigeria and middle eastern countries. Accordingly, Russia’s share of EU gas imports has declined sharply, from 75% in 1990 to just over 40% today.”  The author’s stark conclusion:  “Europe’s gas supply is not dominated by Russia.  93.5% of the energy consumed in Europe is covered by sources other than Russian gas.”

What’s more, even if Europe did depend on Russian gas, it’s far from likely that any intention action by Russia would turn off the spigot. 

The Nemtsov White Paper, Part II: Gazprom (the full text)

Vladmir Putin: The Bottom Line

Part II – Gazprom

by Boris Nemtsov and Vladimir Milov

Translated from the Russian by Dave Essel

(For the PDF version of this document, click here.)

Boris Nemtsov

In February 2008, the authors of the report you are now reading published an independent expert report Putin – The Bottom Line in which they presented their views on what the Russian Federation’s second president had done for Russia. In Putin – The Bottom Line we gave an unflattering but in our view fair evaluation, backed up by facts and figures, of the outcome of Vladimir Putin’s activities for the country – an outcome that is hidden from Russian eyes behind a smokescreen of official propaganda – in such fields as the economy, the army, the pension system, health and education, roads and highways, and others.

A good number of readers rightly pointed out that there was one problem which we had only partially covered – Russia’s energy situation in general and the issue of Gazprom, Russia’s main energy company, in particular. This was a deliberate omission on our part. We believe that the situation around Gazprom is worthy of individual attention and not something to be covered in just a few paragraphs.

This, firstly, is because Gazprom and what happens within it are of the utmost importance to our country. A second reason is because we have direct, first-hand knowledge of Gazprom’s problems because we were involved with it in our professional lives as former Russian minister of fuel and and energy and deputy minister of energy. Our last reason is that Gazprom has become a sort of personal special project of Putin’s: from the very beginning of his presidency he has carefully nurtured this corporation, appointed people close to him to key posts within it, and overseen its work in detail. Gazprom is one of only a few projects for which Putin can be considered to be personally responsible from the earliest days he was in power. One can, as a result, use it as a measure of the results of Putin’s doings.

The Nemtsov White Paper, Part II (Section 3)

This is a the final installment in our serialization of the second part of the White Paper by Boris Nemtsov.  Part II deals exclusively with the Gazprom fuel monopoly. Section 1 was published last Friday, Section 2 on Sunday. This is Section 3, all new material exclusive to La Russophobe which has never before appeared in English. The full version of Part II is available now as a downloadable PDF, click here to view it. We will shortly publish the entire white paper as single HTML page, which can be cut and pasted.  Click “Nemtsov” in our header to read Part I.

Putin: The Bottom Line

Part II, Gazprom

by Boris Nemtsov and Vladimir Frolov

Translated from the Russian by Dave Essel

Pipeline Machinations

In recent year Putin and Gazprom’s management have devoted a great deal of time and effort to a number of gas pipeline projects involving a lot of propaganda ballyhoo as well a serious foreign political gameplay. Many Russians have been led to believe that all these ‘Northern’, ‘Southern’, ‘Bluestream’ and other pipelines are the keystone of Russia’s national interests. Many therefore worry about the fate of these projects and accept that countries which are openly against the pipelines should be painted as enemies.

On closer examination, however, none of these ambitious projects for new export pipelines present anything like and open-and-shut case. In fact, these projects are no less machinations than the asset stripping of Gazprom.

The Nemtsov White Paper, Part II (Section 2)

This is a continuation in our serialization of the second part of the White Paper by Boris Nemtsov. Part II deals exclusively with the Gazprom fuel monopoly. Section 1 was published on Friday. This is Section 2, all new material exclusive to La Russophobe which has never before appeared in English.

Putin: The Bottom Line

by Boris Nemtsov and Vladimir Frolov

Translated from the Russian by Dave Essel

Gazprom Machinations: Asset Stripping

Instead of concentrating on Gazprom’s core responsibilities of ensuring the reliability of the country’s gas supplies and developing extraction, Putin and the management team he put in place have concentrated their efforts on assorted dodges and machinations to engender a new wave of asset stripping and outflow of finances from the corporation in favour of bodies close to Putin and his friends.

Initially, Putin was very keen for Gazprom to accumulate assets that had been taken out of the corporation and placed under outside concerns under Rem Vyakhirev. This included quantities of Gazprom’s own shares and the assets of Sibur, a petrochemical concern.

However, once most of the assets had been brought back under the corporation’s umbrella, the opposite began to happen and assets – in the majority of cases the selfsame assets that had been reacquired – again began to be leveraged away from Gazprom. Putin’s re-election to a second term marked the turning point.

The Nemtsov White Paper, Part II: Gazprom (Section 1)

La Russophobe has previously published a brief extract from the second part of the Nemtsov White Paper, dealing with Gazprom, edited by us from the English version that appeared in the Russian newspaper Novaya Gazeta. In doing so, we had to rely on NG’s translation of the substance, not an optimal scenario by any means. Now, our translator and columnist Dave Essel has undertaken to provide the entire work in English, as he did for Part I.  Another benefit is that we now republish all Nemtsov’s illustrations, and as before we will publish this material in rolling installments and create an online PDF version, as well as a unified HTML document, after the final installment issues. Here is section 1.

Vladmir Putin: The Bottom Line
Part II – Gazprom

by Boris Nemtsov and Vladimir Milov

Translated from the Russian by Dave Essel

In February 2008, the authors of the report you are now reading published an independent expert report Putin – The Bottom Line in which they presented their views on what the Russian Federation’s second president had done for Russia. In Putin – The Bottom Line we gave an unflattering but in our view fair evaluation, backed up by facts and figures, of the outcome of Vladimir Putin’s activities for the country – an outcome that is hidden from Russian eyes behind a smokescreen of official propaganda – in such fields as the economy, the army, the pension system, health and education, roads and highways, and others.

A good number of readers rightly pointed out that there was one problem which we had only partially covered – Russia’s energy situation in general and the issue of Gazprom , Russia’s main energy company, in particular.

This was a deliberate omission on our part. We believe that the situation around Gazprom is worthy of individual attention and not something to be covered in just a few paragraphs.

This, firstly, is because Gazprom and what happens within it are of the utmost importance to our country. A second reason is because we have direct, first-hand knowledge of Gazprom’s problems because we were involved with it in our professional lives as former Russian minister of fuel and and energy and deputy minister of energy. Our last reason is that Gazprom has become a sort of personal special project of Putin’s: from the very beginning of his presidency he has carefully nurtured this corporation, appointed people close to him to key posts within it, and overseen its work in detail. Gazprom is one of only a few projects for which Putin can be considered to be personally responsible from the earliest days he was in power. One can, as a result, use it as a measure of the results of Putin’s doings.

Nemtsov on Gazprom via Novaya Gazeta

Gazprom short-changes Russian consumers

Boris Nemtsov and Vladimir Milov, writing in Novaya Gazeta‘s English edition, offer the following analysis of the Gazprom empire (we have edited the orginal translation for linguistic issues and we have reproduced only one of the numerous tables offered by the authors; the others can be found by following the link). It is a continuation of the authors’ brilliant and courageous White Paper which we have previously translated and published through the good offices of columnist Dave Essel.

Putin and Gazprom

In February 2008 the authors of this paper published an independent expert report titled “Putin, the Bottom Line,” where we presented our vision of the results of the administration of of the second president of the Russian Federation. In that report we gave an uncomplimentary, though fair, assessment of Vladimir Putin’s work in various spheres of our life – the economy, the army, the pension system, the health care system, road infrastructure and other areas. The report was based on figures and facts concealed from Russian citizens by official propaganda.

Many readers noted that there was one issue upon we had touched too lightly, namely the Russian energy industry in general and Gazprom natural gas monopoly in particular.

That was not an accidental omission by us. We considered that the situation involving Gazprom required special consideration which would not be possible to fit in just a couple of paragraphs within our brief white paper. First, because Gazprom plays such a central role in pumping the lifeblood of our nation. Second, because we have first-hand knowledge of Gazprom’s problems, having had direct involvement with the company in our professional activities as a former fuel and energy minister and the deputy energy minister of Russia. Third, because Gazprom has been a kind of special and personal project of Mr. Putin. From the very beginning of his presidency he has cared for the company in a special way, appointing his closest confidants to the key posts in the company and looking into all the details carefully. Gazprom is one of few the projects where Putin can be considered personally responsible for the results, from the beginning of his tenure in office, and one of the projects to be taken as a central criterion for assessment of Putin’s presidential activities, a litmus test if you will.

In this present paper we intended to continue the method of analysis we began in our White Paper and to focus on what has been happening to Gazprom these past few years.