№ 4 (40) 2008
                                   Selected Abstracts  of  Articles
     
                   "GAZ PROM" IS A GLOBAL  CORPORATION
                                        ( with Russian roots )

     
     Alexey Miller at the inaugaration of LNG Plant on the 18th February, 2009
                                           ( at the photo center)


   On 10-11 June 2008 around 300 delegates and guests from 21 OSCE member-states came together for the 11th Annual General Meeting of the European Business Congress , which was held in Deauville, France. Subsequent to the Annual General Meeting, chaired by the EBC President Dr. Alexey Miller, Chairman of the Management Committee of OAO Gazprom, there followed an afternoon conference on “Globalization of Energy Markets”. The sessions of the seven Working Committees took place on the 11th of June.

European Business Congress brings together 110 companies from 21 OSCE member countries, including such major corporations and banks, as  «Gazprom», ExxonMobil, Daimler Chrysler, Siemens, Shell, ConocoPhillips, Total, Deutsche Bank, Dresdner Bank, Alcatel, Wintershall , E. ON Ruhrgas, Gaz de France and others EBC Secretariat is located in Berlin. Twice a year  an EBC newsletter is published in English and Russian. EBC supreme body is the General Assembly. The organization is guided by  the Bureau of 35 people. The EBC President is the chairman of the Board of  «Gazprom». EBC practical work is carried out within seven working committees: «Energy», «Industry and construction», «The law, banks, finance», «Information and Communication», «Environment and health», «Human resources, education, science», « Enterprise Security ».

The European Business Congress  brought together over 260 representatives from 70 companies and organizations from 21  participants States .The delegation of  «Gazprom» was headed by the President of the company, Alexei Miller, president of EBC. Speaking at the plenary session of the General Meeting of EBC, Alexei Miller, said that the European Business Congress is becoming increasingly important  among European and international organizations.

 

 In his report, Mr. Miller, in particular, said: «Today,« Gazprom » is the third largest company in the world with a market capitalization of more than 360 billion dollars and total hydrocarbon reserves, estimated at nearly 30 trillion cubic meters. The market capitalization of «Gazprom» has increased 46 times since 2000  The  increase in volume of gas production in Russia in the past six years –is  the highest in the world. Gazprom » during these years  has been  transformed from a Russian company with subsidiaries abroad into  a global corporation with Russian roots."

Editorial Comment:

«Gazprom» is a  global Corporation. This is very  good for the shareholders of «Gazprom». It is a pity only that it is not a Russian company, but only a company “with Russian  roots”. It's like immigrants from Russia. They  may have Russian roots, but they are already  not Russians. Accordingly, their  interests  are not the interests of the Russian land, not about Russia’s fate but  their main concern is about  the place where they have settled down.

 

Europe should be gasified  at 100% ./ Well, , let us give Europe even more gas and  raw materials for its industries. As to Mother Russia – it is already gasified  at  50% , mainly in the European part of the country. Why should it demand for more?  From a company with only “ Russian roots”.

 

Further, Mr. Miller said: «The world economy requires more and more energy. Fast growing industries, the construction of new generating energy facilities  - all this  increases demand for oil and gas. As a consequence, there has been an increase in energy prices and a growing competition for access to energy resources. In this context, the issue of pricing in relation to gas is particularly relevant. More recently, at a meeting in Paris, EBC, we  forecasted  the  price of natural gas in Europe at $ 400 per thousand cubic meters by the end of 2008, however, even the «Gazprom», having detailed information on gas markets, underestimated the potential for price increases. Already, the average price for our rates in Europe has reached 410 dollars "

 
Editorial Comment:
Excellent!  Gas price is rising  in Europe, so why the global corporation must endure lower internal prices in Russia itself? So what of it that this gas is technically  Russian property? Let  Russians pay  the  European price for gas. ( Besides, Russians claim that they are Europeans  and therefore why should they enjoy the same priveleges - much lower  prices  privileges  for gas and oil  like  like citizens of Arabian  oil and gas producing countries do ?  Russians are not Arabs !  Let them pay the world market maximum price after the “grace period” of  two-three years! ) 

 

There is nothing strange  that  in view of such a pricing policy of GAZPROM towards Russian gas consumers , (let us not forget that  GAZPROM is   “a natural MONOPOLY” in Russia),  the price of gas in Russia began to rise higher and higher…

 ...
Explaining the reasons for the high volatility of the oil market, Miller said that «we are witnesses to a great jump in prices for hydrocarbons. Prices move to a new higher level. We expect that in the foreseeable future, the price of oil will be close to the level of 250 dollars per barrel. “

Editorial Comment of 2008:
How good that the price of oil rises. In fact, «Gazprom» and it not only  a gas company but now it is also an  oil  company too thanks to  «Gazpromneft» subsidiary ( “Gas – oil industry” in Russian). That is the reason for great joy of the shareholders! Well, if some Russian consumers are not happy with rising gas prices   they should remember  - it is  Market, dear Sirs!

 

Editorial Comment of 2009.

 

HOW Mr. Miller “forecasted” even higher prices for oil and gas in June 2008 when American financial crisis has already began and the timing for the collapse of oil prices in the  approaching world financial crisis was only a matter of time – give or take a few months time lag. Do our» efficient top managers” ever read analytical reports? Or they are interested mainly in other papers, regarding the issues of sharing profits?

Mr. Miller said: "Competition for resources is enhanced, we can see that  by our own  eyes. We are constantly faced with the manifestation of this trend in the negotiations with partners in various projects and when we are signing contracts.
The most severe competition is among  three largest gas markets: Europe, East Asia and North America. But for the «Gazprom» it  is good news, because our main product - natural gas - is becoming very popular both in the East and West, and liquefied natural gas technology  provides us access to the North American market as well”

Editorial Comment:

 
We are not afraid  of competition at the gas markets, it is good news. There is enough  Russian gas for all gas importers, the most important thing is that they should  pay more.. Besides we have already “acquired”  from “SakhalinEnergy»  the  LNG plant on Sakhalin Island, which enables us to offer  LNG for sale around the world/ Except  Russia< of course with its so far lower prices .  Russia  may tolerated  without gasification of its distant the North, Siberia and  Far Eastern parts for  50 years  more as it did before.

 

 Further Mr. Miller continued: «To meet the demand of  gas consumers  “GAZPROM” will invest in 2008  about  30.000 million US dollars into developing new gas provinces and new pipe lines, into construction of new underground gas storage facilities and trading Centers in

in Europe and other regions of the world”

 

Editorial Comment:

One could be indignant that “GAZPROM” will invest more than  ten fold  more in foreign countries   than in Russia itself. But what else one could expect from an “immigrant company”?

 http://www.gazprom.com/eng/news/2009/02/34304.shtml

Further Mr. Miller dwelt on the new routs for gas export from Russia. He said:

 

» Upon the completion of construction of« Nord Stream » project  we shall be able to supply at least 55 billion cubic meters of gas annually for a number of markets in Europe such as Belgium, France, Great Britain, Germany and others. In the case  it is considered necessary ,  the export capacity of « Northern stream »can be increased.  At the same time, «Gazprom», together with its other partner, the company «ENI», successfully promotes  another project «Southern stream». This pipeline is yet another means of ensuring stability and security in energy supplies to  fast growing markets of  Central and Southern Europe. . We have already concluded agreements with Bulgaria, Hungary, Serbia and Greece and held successful negotiations with other potential transit countries. I shall take advantage of this opportunity to declare that the question of the route of the pipeline is finally solved, the configuration of the project is defined.
At meetings of the St. Petersburg Economic Forum, we agreed that Slovenia, and Austria will be able to participate in the project”

.
Editorial Comment:
«Northern stream», «Southern stream»  what great care is shown for non Russian gas consumers! God forbid  that Europe should be left  without  enough gas, and the «Gazprom»  shoulld not be able to earn  even more Euros!  Why so ?  Because the  habitat  for the main shareholders  of GAZPROM is - Europe  and one should worry about it. Worry  as about  his own home!  Meanwhile  in Russia itself  something  old can be a little  patched ,  something can be bought from impoverished Russian Regions (provinces), and even  something can be built – not much and without  hurry, enough  to show at the Central television channels  as the «Gazprom» brings gas to some Russian  village residents.

 
 Mr.  Miller further  declared: "Some people see in the« Southern stream » a threat to the project

« Nabucco ». All I can say - is that in the face of increasing demand for gas in Europe, these projects are not  competitors. In the first place - they are not competitors  because of their  different   resource base.

 
Editorial Comment
It is true,  with regard to the  resource base. No one can compete with us . And if we do not have enough   gas for Europe, than  it is quite possible to convert  to coal  our  Electricity and Heat generating Stations. Why not ?  We are not so over   concerned with ecological issues like Europeans, we are a big country and  we still have ecologically clean spaces  to place there dirty coal technologies.  Besides it will also beneficial to GAZPROM,  because today GAZPROM is also a coal company !  GAZPROM is always a profit winner ! Whenever Russian gas consumers and Russian consumers in general are always partial losers today and complete losers the day after tomorrow. Why we should build new oil refineries and convert our at least municipal transport fleets to compressed natural gas? In the former case we shall “spoil” valuable raw material – crude oil which is needed for export/ In the latter case it so evident – the less  gas Russians consume at their own  country the more can be exported abroad. As simple as that.

 

Further Mr. Miller spoke of “unreasonable competition” among gas importers. Не said: “Recently in Europe, one can hear a lot of comments about the need to diversify the energy supplies sources and routes. The desire of Europe  to diversify the sources is quite understandable. However, it seems  that such statements are based on the strange assumption that any  alternative  is better than the supply by  traditional Russian energy producers. It is difficult to find a justification for such a mistaken view. Often attempts  to diversify at any price lead to a totally unexpected result. Take for example the  Central Asia. Many officials and companies from the European Union, the USA and China have made a lot of diplomatic efforts aimed at obtaining greater access to resources in the region. In reality, however, the following  effect is observed, which we call the «Caspian paradox». Trying to bring new suppliers  to the markets and thus  to make them compete with each other  in Europe ( to facilitate the competition among gas  vendors), instead  all this  created just the opposite situation.  There is  no “new gas” for  Europe, but the competition of gas buyers has increased in the Caspian region. And this new situation   was immediately  reflected in the sharp rise in gas prices from the region.

Editorial Comment:
As soon as Europe, U.S. and  China  began direct talks with  Central Asian countries on  the direct sales of gas to these countries, the Central Asian countries immediately  have raised  gas price  to the European level.  Including  for  the traditional buyer -«Gazprom»!  That's  a bitter pill for “Gazprom”!  What is the way out?   Should “Gazprom” raise the price of  gas  exported from Russia ( not necessarily Russian gas) to Europe buying  it from Central Asian countries  at today's European prices  ?  Or should it “squeeze”  even more  Russian customers  to decrease Russian consumption and thus export “saved gas” to Europe? Or should production of Russian gas be increased in the new  Arctic gas provinces ?  Which demands huge investments and new technologies… We shall see it in the near future. Here we can only remind that without Central Asian  import  there is a deficit of gas in Russia. It is hard to believe but it is a fact. That is why  the grand export projects of Mr. Miller seem inadequate in many respects. 

 

All these “ Streams”, here and there,  have only one practical purpose – it is time to get rid of the dependence on the gas transit countries – Poland and Ukraine. What is more – the transit problems are caused not only by financial disagreements between the exporter and the transit countries.  These are very strongly politically motivated. By twists of inner politics ( especially in Ukraine) and by the European foreign policy of the USA ( mainly  through its new European client  - Poland). The  intricate combination of financial and political dimensions in transit issues make  Russian gas transit through these countries unreliable indeed. All these alternative “Streams” may somewhat soften the  stand in gas matters of Polish sovereign – the USA and to  add negative stimulus for anti-Russian purely political business of the Ukrainian authorities, business  in which their different Administrations  have been so successfully engaged for 18 years. 

 

Whatever harsh is our criticism of monopolistic practices of “Gasprom” one should never forget an undeniable fact – gas ( and energy in general) supplies for Europe it is not only a matter of big money .  It is also a matter of big politics. And not only of European politics but going well beyond the Ocean. Those Europeans who do not understand this, or  see in their nightmares only a hairy paw of the Russian Bear, these are very naïve people and in a way are happy people – the less they understand,  the better they sleep even during the unfolding  world economic crisis for which somebody has to pay at this shore of the Ocean to diminish the burden of the Payback on the other shore. It will only serve good if Russians and Western and Central Europeans remember on which shore they stand.

 

Speaking on the  “dangers of Russian gas for Europe” Mr. Miller  reasonable noted that “For decades, «Gazprom» ensures uninterrupted export of gas to European consumers, including the times of «Cold War» and the subsequent transition of Russia from a planned to a market economy. Relations between the Europeans and «Gazprom» can be called interdependence. We are dependent on European consumers. So they depend on us.  It is a mutual interdependence”

Editorial Comment:
We should not forget here that during the decades of Soviet gas exports,  the supply of Soviet  gas was provided by the State planned economy,  which had its priorities entirely different from those of today. The highest priority was the development of National Economy  and  Soviet gas exports abroad  were just a part of that strategy of National Development. Besides the Soviet State attached great importance to new gas provinces  exploration.

 

. In the new, capitalist Russia a limited number of “new rich” appointed by Boris Yeltsin government  and higher bureaucracy  ” ,  seized and transferred,  practically free of charge,  to their private ownership  everything  of value that was created by several generations of Soviet people, by  millions of  men and women,  who worked for meager wages or even  for a prison camps rations. The common heritage of  several generations of Soviet people  was  by fraudulent practices handed over to mere hundreds of unscrupulous people who declared themselves as owners  including the owners of  the gas industry of the USSR.  Yet the fact of appropriation of a property by ways of  “stealing by  existing  law” – by fraud,  does not create ownership since the times of laws of Roman Empire. Because the fraudulent deal is invalid, it  is  legally void from the moment of its enactment. Therefore the Payback is inevitable in this case as well.

 

 Realizing this fact too many new rich prefer not to invest into the National Economy/ Instead they  prefer to export whatever is possible to export – capital, mineral recourses, etc.   They think  that their money and property is safe abroad. But  the sad fate of the former  ex Premier of Ukraine – Pavel Lazarenko- , who was jailed for several years in the USA for his corruption  practices in the Ukraine just prove this simple legal fact – a stolen property is never safe anywhere. It is just a matter of time and circumstances.

 

As to private stock holders of GAZPROM  it will be quite interesting to read the book “GAZPROM – Russian secret weapon”,  written by Valery Panyushkin and Igor Zubar, which was reviewed in our printed Issue #3 (39), 2008. It is a pity  the book is available in Russian language only.

 

The fact that Russian business has no “friends amicable”   abroad but instead it  has only hard competitors was revealed by Mr. Miller who spoke with great concern about protectionist policy in Europe.

 

He,  in particular,  said: “One can not help but express concern about protectionist tendencies, which are beginning to emerge in the EU. Let us ask the question: how reasonable are the steps taken by the European Commission  which  invented« Anti-Gazprom  condition », if this “condition”  impede investment, much needed to meet  the growing demand  for gas, if these invesnments art needed  to ensure the reliability and flexibility in the supply of Russian natural gas to our European customers, to ensure the  energy security of the EU? This looks  as  if  somebody  wanted to set barriers  in the way of the Gulf Stream, which warms the whole Northern Europe !

 

 Creating  new restrictions in conditions of energy  recourses deficit in Europe  is not the most sensible policy indeed!  And in this respect  we are not original, and we are  not alone. Among our European partners, there are  plenty of  business people  who think in the same way. . And we will co-ordinate the  efforts with these businesses  to convince the  European bureaucrats  that  one must  not cut the  tree branch  on which one sits. Otherwise, on the European horizon  there  will appear  not energy shortages, but  de-industrialization of the Continent! (It was said in  such  terms and  no less!  Editorial remark) .). We believe that cooperation and international integration, rather than protectionist barriers would be the best protector  of  both - national and European interests in the sphere of  gas supplies”.

 

.
Editorial Comment:
Apparently, the European Commission understands that the monopoly of «Gazprom» is dangerous for Europe, as  all  monopolies are. If  «Gazprom» is not very much concerned  about the security of Russia, then Europe has the perfect  right to think why should  «Gazprom»  think too much about the interests of Europe?

 
Yet Mr/ Miller insisted and said: “That is why   «Gazprom» is at the forefront of implementing joint projects with European partners. In 2007, we have made significant strides in implementing such projects. Let me cite just two examples. One of the largest projects the company is to develop  s the giant Shtokman field, which will be operated by «Gazprom»  together with the French company «Total»  and the Norwegian  “StatoilHydro”. This project will help to meet growing gas demand in Europe and elsewhere. The peculiarity of the scheme of the project is that for the first time in the history of gas supplies from Russia for almost 50 years there  will be a  gas supply  by the pipeline «Northern stream»  from a  specific gas province - one of the largest in Russia., thereby directly linking the producer to the end user.

 

 Second, but equally important example is the joint development of South-Russian Gas Field together with the German company «BASF». The project represents a full cycle - from gas production to delivery to the end  consumers/ It  is a collaborative affair that goes beyond the usual relationship between the seller and buyer. This is - an example of cooperation with European partners on a qualitatively new level, which we believe will become an example for the energy security of Europe.

 
Editorial Comment:
When the Russians first heard of what later was called  Stockman  and   South-Russian Gas Fields, many Russian of   corporate gas consumers  sighed with relief - finally  there will be something for us too.  Empty dreams!  Judging by   what we hear from this high rostrum, from the lips of the Chief  of «Gazprom» «... Gas for 50 years would be channeled to the gas pipeline" Nord Stream  as gas  from  a particular field ,one of the largest in Russia, meant for export only. The second  major  gas  field .- the  South-Russian gas field will be again operated  together with the German company BASF , which in more simple terms mean – operated for export only..»

 

Well here we can say! Valuable raw materials without any processing  and added value  will ooze abroad. Products made from this material abroad will be purchased later by  Russia from abroad of  its internal  needs. Millions of people, thousands of enterprises  in Russia   will  never receive .this new Russia gas.

 

In conclusion Mr. Miller said: @Ladies and gentlemen, because the interdependence of suppliers and consumers of energy continues to grow worldwide, we are playing an active role in ensuring the reliable operation of gas markets. It is clear that «Gazprom» will continue to promote the economic integration of East and West.

Editorial Comment:

And what about the economic integration with Russia?

 

For our non Russian readers information.

 

Please, note, that:

 

1)      Our Editorial Comments on these  English language  web pages appear several months later  after  they had been originally published in our printed Issues of the Magazine.  Therefore  they may be a little different from the original ones because the world economic crisis makes it necessary to estimate many phenomena from a new angle.

2)        As foreigners are more or less ignorant of the realities of Russian life it is sometimes necessary to “enlighten” them what is going on in Russia and what are the real roots of this or that phenomena in Russian business. including the most lucrative one – Russian monopolistic gas business.  That makes us writing on this pages such facts and realities which are never mentioned in our Russian language edition because it  is “a common place” which is well known to those who live and have business in this country.