Inefficient, Unwieldy and Mismanaged


Belarus took a beating from Gazprom both on the ice and through the pipes. (Photo from IIHF World Championship, not Gazprom match referred to in the article).

From Time Magazine:

Heavy Hitter By Yuri Zarakhovich / Moscow Passions were riding high Jan. 8, as the hockey team of Russia’s state-run energy giant Gazprom locked horns with the Belarus national team in the final game of the annual Belarus President’s international hockey tournament in Minsk. In a desperate moment, a Belarusian tripped the Gazprom captain with his stick, but the Russian scrambled back to his feet to pass the puck in a lightning movement that led to a goal. Gazprom won the game 4-3, and the cup. And well it should, smiled the Gazprom captain Alexander Medvedev, 51, because Gazprom always wins. Just ask Shell or Yukos or Ukraine. Don’t even mention it to ExxonMobil. When he’s not skating, Medvedev is deputy chairman of Gazprom’s management committee and general director of Gazpromexport, Gazprom’s export arm, which accounts for 80% of the revenue of the world’s second largest energy company and supplies a quarter of Europe’s natural gas–and 100% of Belarus’. Medvedev’s remark hit home for his fellow hockey buff and adversary–the forward who had tripped him up so uncouthly, also known as the President of Belarus, Alexander Lukashenko. On a tense New Year’s Eve night a week earlier, Medvedev forced Lukashenko to accept a price hike that more than doubled the cost of natural gas, from $46 to $100 per 1,000 cu m. To save his economy from collapse, Lukashenko caved, after having dug in his heels for years: he also sold 50% of his national gas-pipeline operator Beltransgaz to Gazprom. That is what you call a power play. Be it a scuffle with foreign consortiums on Russian soil, or in pricing battles with Russia’s neighbors, Gazprom wins very much in style of the proverbial Soviet Army steamroller: inefficient, unwieldy and mismanaged, it crushes foes by its mammoth weight and monopoly gas supply. In January 2006, for instance, when the Ukrainians balked at Gazprom’s price, Medvedev turned off the taps. Pay or freeze, he told them. They paid.

Zarakhovich neglects to mention that Gazprom’s key competitive advantage is that it can count on the Kremlin to assault its competitors, write its monopoly status into law, and help sweeten a bid by throwing in infrastructure, arms, debt forgiveness, or merely the threat of political revenge. Complete article can be read here.