Gazprom,
which is an acronym of gas industry in Russian, is the biggest producer and
exporter of natural gas in the world. This company was founded in 1989, by the
former minister of gas in USSR, Viktor Chernomyrdin. The privatization process
of Gazprom in the Russian Federation started in 1993, when Gazprom Gas Concern
became a joint-stock company, and was achieved in 1997. Today, this
is a state-controlled company, since the Russian government controls over 50%
of its shares, hence its legal status as public joint-stock company. The
current CEO and Deputy Chairman of the Board of Directors is Alexey Miller. In
2015, Gazprom realized a 82.9 billion euro turnover and represented 8% of Russia’s GDP. Its main client is Europe - 82% of the exports to Europe went to
Western European countries and 18% to Central Europe, in 2015.
All this
power gives to the company an illusion of being free as a bird. The question
here is: Will this freedom last for long?
The European Commission accusations against
Gazprom
On 22 April
2015, the European Commission accused Gazprom of holding an excessive dominant
position, overcharging and impeding competition.
Indeed,
some European countries were victims of unfairly high prices that were imposed
by the Russian gas giant. Estonia, Latvia, Lithuania,
Bulgaria and Poland were excessively charged compared to other Gazprom client
countries, despite the low-cost sources of the gas.
According
to the European Commission, the Russian company has also forbidden some
European countries to resell the gas they have bought, which, as a consequence,
represents a barrier to cross-border competition. These countries are
Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland and
Slovakia.
Moreover,
the European Commission declared that Gazprom would be probably fined 10% of
its turnover, which represents over 9 billion euros.
The company
answered that these accusations don’t make sense and that they have always
respected national and international rules.
Some weeks
ago, in October 2016, the European Commissioner for Competition, Margrethe
Vestager declared that the future step is to reach an agreement with Gazprom,
being in accordance with the European Commission’s objectives.
If this
agreement succeeds, the Russian state-controlled company wouldn’t have to pay
any money to the European Commission. In the opposite case of a failed agreement
and disrespect of the rules, the gas giant Gazprom would have to pay 10% of its
turnover.
According to the Deputy Chairman of
the Management Committee of Gazprom, Aleksandr Medvedev, a compromise that is suitable for both parties has to be found. In fact, Gazprom plans to write a
proposal document addressed to the European Commission within the next few
weeks.
However, it
is also important to mention that the bad political relationship within the EU
and Russia still persists and it’s definitely not a good sign for the future business
relations between the two partners. We simply can’t ignore the involvement of
Russia in the Ukrainian conflict and the economic EU sanctions against the
Russian Federation, as well as the disagreement about the Russian support of
Bashar al-Assad in Syria.
The Gazprom bribery affair
The other
point that may affect the future of Gazprom is the accusation of the former
member of the Board of the company, Bogdan Budzulyak, and Deputy head of
Department on transportation, underground storage and use of gas, Alexander
Shaikhutdinov, taking bribes of about 2.06 billion euros between 1999 and 2006.
According
to the Swiss federal prosecutor who is in charge of the investigation, this
money was offered and transferred through Swiss bank accounts by the Swedish-Swiss
engineering company ABB, the French company ALSTOM specialized in transport and
power, and the British company Siemens Industrial Turbomachinery which produces gas
turbines.
In
consequence, the two men were released by the Swiss court on 1 April 2016.
Today,
Gazprom remains very powerful, as the current CEO Alexey Miller is a close
friend to the president of the Russian Federation Vladimir Putin, who permanently
stays in control of the company.
Illya G.
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