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Book Review: Gazprom – Russia’s New Weapon

russiasnewweapon“Gazprom – The New Russian Weapon” by Valery Panyushkin and Mikhail Zygar By Grigory Pasko, journalist Recently, the Russian mass media reported that Gazprom head Miller had met with president Putin to report about the current situation in the company Gazprom and about its prospects. The report concerned three hot topics: the fate of the pipelines leading to Europe, the increase in the price for Central Asian gas, and deliveries of the raw material to the republics of the former USSR. For example, Miller told the President that he considers “very timely” the realization of two new gas transport projects – “Nord Stream” and “South Stream”. About the fact that the company Gazprom has problems, the mass media did not report. Which got me thinking: do Russian citizens even find it interesting at all to know something about Gazprom? I came to the conclusion that no, they don’t find it interesting. Because Russians have long ago accustomed themselves to the fact that Gazprom – this is not a Russian company in the sense that its assets and capital belong to all Russians, but rather a private company, belonging to a narrow circle of persons.

And indeed, Gazprom treats the gas it produces as if though this gas – does not belong to all of Russia, but to Gazprom itself.In a just-published book, several authors have attempted to tell the story of what exactly this Gazprom is all about.”Gazprom – The New Russian Weapon“That’s the name of the book, which was written by the journalists Valery Panyushkin and Mikhail Zygar, joined by Irina Reznik. In Russia, the book was published by “Zakharov”, [ISBN 978-5-8159-0789-8] but Russia did not become the first country where it appeared on the bookshelves. The first place it came out was in Germany. In the near future, it will also be available in France, Spain, Latvia, Estonia, Slovenia, Poland, and Ukraine.The book is interesting and informative, but in my opinion it leaves quite a number of things unsaid. Every now and then, you encounter such a passage in the book: former employees of Gazprom did not speak with the authors about this or that event from the life of this gigantic corporation-monopolist on the grounds that “not everything can be said” – intimating at “higher spheres” and that one could get killed for telling the truth about Gazprom. (Already in the preface, the authors write: “The first words that former Yeltsinite acting prime minister Yegor Gaidar told us… were: “You don’t understand that they’ll kill you? Do you understand what you’re getting yourselves into?”)In Russia, they can kill a journalist not only for telling the truth, but even for an attempt to get too close to it. Judging by the fact that all three of the book’s authors are still alive and well, we can assume that they didn’t even manage to get close to the truth about Gazprom. Perhaps this was a conscious decision on their part. But even this general and superficial survey of the country called Gazprom is enough, in my opinion, to form yet another impression about Russia – a country with a lying and corrupt leadership through and through.A reader previously unfamiliar with the subject will discover all sorts of hitherto unheard-of hidden truths about Soviet-Russian methods of running the economy and managing large companies. For example, he will learn the favorite saying of the former chairman of the Gazprom management board, Vyacheslav Sheremet: “Whatever you may be talking about, you’re talking about money”. They’ll learn in what conditions gas is produced; about under-the-rug Kremlin intrigues; about the machinations and ways and means of “grab-and-run privatization” [the clever Russian made-up term for this is “prikhvatizatsiya”, which sounds almost exactly the same as “privatizatsiya”—Trans.] of the national wealth; about today’s state of affairs in the empire known as Gazprom.Let’s take things in order. With the collapse of the Soviet Union, as the authors tell us, Gazprom, producing more than 800 billion cubic meters of gas per year and occupied first place in the world by volumes of production, having a network of pipelines 160 thousand kilometers in length, possessing 350 compressor stations, 270 field gas processing facilities, several thousand wells and dozens of underground storage sites, lost a third of its pipelines, a third of its gas fields, and a quarter of its compressor station capacity.From the text it can be seen that the main role in saving Gazprom from falling apart was played by its chief, Viktor Chernomyrdin, who later became prime minister, and is now the Russian ambassador in Ukraine. (In describing the scene of the session of the government of the RF in the year 1992, where the fate of Gazprom was being decided, the authors for some reason indicate that taking part in the meeting was the deputy minister of fuel and energy, “then still a banker”, Mikhail Khodorkovsky, “who had apparently already decided to get into oil”. This reminded me of the well-known saying “In the orchard there’s an elderberry tree, in Kiev there’s an uncle”) [explanation: two completely unrelated facts made to appear as if though they are connected simply by virtue of being stated together—Trans.].The gratuitous mention of Khodorkovsky is strange also because in the middle of the book there is a story about the fate of the president of SIBUR, Yakov Goldovsky. Goldovsky was arrested right in the Gazprom building on Nametkin street in Moscow, when he came to be received by today’s Gazprom head Miller. They held Goldovsky in jail until he signed a note that he would transfer to the structures of Gazprom the shares in ten or so petrochemical enterprises. This note became a “get-out-of-jail card” for him. Nowadays, Goldovsky is living in Vienna.Since the authors decided to mention Khodorkovsky, then they could have connected the story of the head of YUKOS with the story of Goldovsky: in essence, Goldovsky was the first victim of the insatiable Putin team.The book, I will note, is an interesting read. The essence of the famously convoluted subject of the book is that the captains of the old guard – people like Chernomyrdin and Vyakhirev – did everything possible to resist the onslaught of the young reformers such as Chubais, Fedorov, and Nemtsov, and managed to preserve the gas empire, to save it from falling apart, but were unable to withstand the onslaught of Putin and his cronies: Gazprom became their property.In the part concerning a description of the transfer of Gazprom property into the hands of Putin and his friends, there are several fascinating facts in the book. For example, there is the following paragraph in the book: “They say that supposedly already in the autumn of the year 1999, director of the FSB Vladimir Putin was insinuating to decision-makers (Alexander Voloshin, Boris Berezovksy) that he does not want to become premier and president, but wants to head Gazprom.” Maybe it really was like that. However, what brings attention to itself is the blatant inaccuracy the authors let slip by: in the autumn of 1999, Putin was already chairman of the government of the Russian Federation, and not director of the FSB.The description of how chairman of the Gazprom board of directors Dmitry Medvedev presented the new chairman of the management board of the company, Alexey Miller, is interesting – “a nervous functionary with a puny moustache. Several years will pass before the new head of the gas concern acquires a calm pretentiousness, loses the moustache, and picks up a radiant smile.” I don’t know what feelings this functionary evokes in the authors of the book, when I look at him, everything about Miller screams that he is a to-the-core subservient person.“At that moment”, the authors of the book draw a conclusion, “President Putin scored his first big victory in the entire presidency. At the head of the largest company of the country turned out to be a person absolutely loyal to Putin personally.pipeline031908Construction of the Nord Stream pipeline in the Gryazovets-Vyborg sector (photo by Grigory Pasko)Further are mentioned others “loyal personally” as well. Here’s another paragraph: “The company Gunvor, exporting all the oil of Gazprom, got the oil of «Sibneft» on top of that as well… and became the third-largest Russian oil trader. The company Gunvor, one of the co-owners of which is an old acquaintance (and, they say, a personal friend) of president Putin, Gennady Timchenko.”Further, there are more mentions of personal friends. “After the final victory of Miller [it would have been more correct to write “Putin”—Author] over Vyakhirev, control over «Sogaz [an insurance company entering into Gazprom—Author] was given to the St. Petersburg bank «Rossiya». The largest shareholders in the bank as of the end of the year 2004 were Nikolai Shamalov (9.7%) and chairman of the board of directors of the bank Yuri Kovalchuk (37.7%), who are considered to be personal friends of president Vladimir Putin.”Much space is devoted in the book to the role of Gazprom in the annihilation of the television channel NTV, which belonged to Vladimir Gusinsky. The description of the media wars ends with such a conclusion: “Already in the spring of the year 2007, «Gazfond» bought out from Gazprom 25% of the shares in «SIBUR Holding». In addition to this, «Lider» [a company managing the reserves of the Gazprom pension fund and belonging to the bank «Rossiya»—Author] is the largest co-owner of «Gazprombank». Bank «Rossiya» owns a controlling block of shares in Ren-TV and 35% of the shares in TRK [Television and Radio Channel—Trans.] «Peterburg». It is precisely to «Gazprombank», and not at all to Gazprom, that the company «Gazprom-Media», for example. belongs. [I will add on my own here that 60% of the shares in the radio station «Echo Moskvy» belong to «Gazprom-Media»—Author]“In such a manner, it is not difficult to assume that the indirect beneficial owner of all these large Russian media outlets is none other than comrade Putin.It goes without saying that there is also a chapter in the book devoted to Nord Stream – this beloved child of comrade Putin and Gazprom. Problems with construction, the participation of former Bundeskanzler Schroeder, the political component of the project, the role of the Baltic countries – all this, naturally, is there in the book. There are also figures. “In Germany, the volume of imported Russian gas comprised 40% of overall consumption, in Italy and France – 25% each, in Austria – 75%, in Slovakia and Bulgaria – around 90%, and in Finland all 100!”Several pages later, the authors will name yet another figure: Russia is provided only 50% with Gazprom gas – that is, actual Russian gas.The authors also mention the employees of Nord Stream – former officers of the secret service of the DDR – the Stasi. Named are managing director Matthias Warnig, director of personnel of Gazprom-Germania Hans-Uwe Kreher, financial director of Gazprom-Germania Felix Strehober… The authors devote particular attention to Gerhard Schröder, who, according to the assertion of the authors of the book, does everything to avoid giving interviews to journalists, from which journalists arrive at a conclusion about how the lack of desire of the former Chancellor to talk leads to the thought that he’s got something to hide.So what’s missing in the book? The view of a specialist on the true state of affairs at Gazprom. For example, the opinions of Vladimir Milov, president of the Institute of Energy Policy. His opinion has been stated by him recently in an article in Gazeta.ru. In the opinion of Milov, the largest state companies – «Gazprom» and «Rosneft» – will already in the nearest time, perhaps, be not in a position to settle their debts. They will have to be bailed out by the state. There are no other sources for this other than digging into the state’s financial reserves.According to financial reporting by international standards, as of 30 September 2007, the cumulative debt of these companies comprised more than $85 bln, or around one fifth of the total volume of Russian corporate debt.A significant part of this debt – 42%, or nearly half – is represented by short-term loans and borrowings with a maturity period of up to a year. The overall volume of short-term debt of the two companies today exceeds $36 bln (more than $17 bln at «Gazprom» and more than $19 bln at «Rosneft»). The oil-and-gas state companies are going to have to return these funds to creditors already in the current year.I will add on my own here: to return with the help of the state itself, that is on account of the taxpayer – the people of Russia.In the liner notes on the book’s cover, its authors wrote thus: “Gazprom, its gas and pipelines are so strongly feared, Gazprom, its gas and pipelines are so admired, that it seems there is no longer even any time left to have a look — and how is Gazprom organized? What is this — a mechanism or an organism? In what condition now is this powerful Russian weapon that Beria and Khrushchev forged, that Brezhnev and Kosygin learned how to use, and that Chernomyrdin and Vyakhirev transferred over into Putin’s hands? Is it indeed dangerous or, perhaps, rusted through? Finally, can one attempt to take it apart, in order to get answers to these questions?““The book about Gazprom turned out to be a book about Russia.““We looked at the country though a twisted Gazprom pipeline and understood that if this pipeline at some sector of its history had taken a different turn, the country would have been different.”Having read the book two times (the second time already thoughtfully and with pencil in hand), I came to the conclusion that the authors did not tell about Gazprom, but merely ATTEMPTED to tell about this company. I don’t know why it turned out that way for them. Maybe, this company really is classified, just like everything Putin touches seems to become. Or maybe, they couldn’t resolve themselves to wade into the thicket, recalling the words of Gaidar “where are you going, they’ll kill you”… Answers to many of the questions raised at the very beginning of the book never do get heard.And indeed, there aren’t any conclusions in the book, either. Like one reviewer wrote, “…The subject, in essence, is not laid bare: Zygar’s and Payushkin’s book is not really about «Gazprom». This is an interesting look by two journalists at the history of Russia, which, in their version, is permeated to the core with gas.”To this is left to add that in «Gazprom» itself, if we believe the reports in the mass media, they have not read this book and do not intend to read it.Indeed, what won’t journalists write. So it’s a company. So it belongs to several people. So what? Practically all of Russia belongs to these several people. Surely we don’t expect that these several people are going to flinch every time someone writes a book about them and their property.By the way, there are plenty of journalists – with their already written and yet to be written books – who also belong to these several people.