Text 3. Putin orders Gazprom Changes

Date: 2015-10-07; view: 389.

President Vladimir Putin on Monday ordered gas giant Gazprom to make steps to increase its transparency and raise a cap on foreign ownership. Putin also told a regular government meeting that it is high time to move Gazprom's stocks away from a two-tier system under which shares traded in Russia are sold at a large discount to American Depositary Receipts in Europe.

Markets greeted the president's comments as a much-needed sign that the government would tackle Gazprom's murky dealings and provide a more level playing field for Russian and foreign investors. Gazprom shares shot up 6% to close at 35 cents in Moskow. But the ADR[1] price fell 0.8% to $6.08 in London.

Calling for new energy to be sunk into the liberalizing of Gasprom shares, Putin said a working group would be formed to come up with a plan within three months. The group is to be led by Dmitry Medvedev, the Kremlin's deputy chief of staff and the board chairman of Gazprom. The plan should include a lifting of the curb on foreign ownership in the company from 20 percent to 40 forty percent, Putin said.

Currently, foreigners are prohibited from buying shares on the local market. Foreign ownership is estimated by analysts to amount to 11.5 percent, but the number is probably much higher because many foreigners invest through gray schemes that give them access to the cheaper local market. This two-tier system, created by presidential decree, has been coined by market players as a “ring fence” that keep foreign investor out of the Russian market.

Stock prices – both at home and abroad – have been suffering for the past few years, largely because of the ring fence that limits share liquidity and foreign investor enthusiasm. “Right now, the situation doesn't completely satisfy the market players, shareholders and the government, which is also a shareholder”, said Medvedev. The government owns 38 percent of Gazprom. Charges will be made by amendments to existing laws and presidential decree, Medvedev said.

Analysts cheered Putin for speaking out on Gazprom, Russia's largest company, which produces about a quarter of the world's gas. “This shows the particular way that Putin works,” said Stephen O'Sullivan, oil and gas analyst for United Financial Group. “He holds these regular Monday morning Cabinrt meetings and the process starts.”

Even though the announcement is the latest in a long line of plans to change things around Gazprom, this one is significant because it has the explicit backing of the president, O'Sullivan said. Interestingly, the working group's proposals are set to be released in July, shortly after a Gazprom shareholders meeting set for June 29. Thus, the group's proposals will only be released after the old guard at Gazprom has had an opportunity to exist.

“The timing can't be a coincidence,” O'Sullivan said. The announcement's timing also signals that Putin wants to discuss Gazprom with German Chancellor Gerhard Schroeder, who arrived in St. Petersburg on Mondy for talks with Putin, said Jonathan Stern, a gas expert with the Royal Institute for International Affairs.

(St. Petersburg Times, Tuesday, April 10, 2001, p. 6)

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