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The Business Online: Gazprom: Don’t stand in our way

Don’t stand in our way

By Richard Orange


‘In the 20 years I’ve been doing this, I’ve never seen Gazprom exert this extent of bullying or political pressure’

You could be forgiven for thinking that those hundreds of fashionably-dressed couples caught on TV disembarking from chauffeur-driven Mercedes and Rolls-Royces into Claridges and the Dorchester hotel last week were heads of blue-chip companies. If so, you would have been wrong.

Those sturdily-built, prosperous, cigar-smoking men accompanied by bottle blondes were Russian – and there were some 2,000 of them in London last week attending the Russian Economic Forum.

Many flew in on eight specially chartered Transaero jets. The glitzy entertainment kicked off with a concert by Liberty X. On Saturday night, some of Moscow’s most beautiful, most famous, and most rich glugged Moet and Chandon in an Alice-in-Wonderland-themed fantasyland built under the Victorian arches of London’s Old Billingsgate market. And the fashion show put on that night by DJ Zorkin and Russian designer Denis Simachev illustrated that the Russia of grim-faced oligarchs in loud, ill-fitting pinstripe suits has passed. “Moscow style” is starting to match anything London, New York, Tokyo or Milan can offer.

But the cameras were there for other reasons. The Russian bear was growling and Moscow was demonstrating its growing economic influence on the West. Alexander Medvedev, gas giant Gazprom’s deputy chief executive, even made it on to the BBC’s main evening news signifying just how far Russian companies have come in establishing their global profile.

President Vladimir Putin’s seizure of control over Russia’s oil and gas sector is now complete. Russia is flexing its muscles to recover its former superpower’s swagger on the world stage.

The forum’s week came after a threat from Alexei Miller, chief executive of Gazprom: if Europe didn’t allow it the access it wants to European gas pipeline and supply companies, Gazprom might divert its European energy supplies to the US and the Far East. On the BBC, Medvedev put it even more clearly: “There are two concepts available – a weak Russia or a strong Russia. There are still people who believe that weak Russia is good for the world. We completely disagree with this. A strong Gazprom is good for the world.”

Cliff Kupchan at Eurasia Group, a consultancy that studies the politics of energy told The Business: “In the 20 years I’ve been doing this, I’ve never seen Gazprom exert this extent of bullying or political pressure. I could describe the Moscow mindset right now as ‘Petro-steroid’. They think this is their ticket back to the world stage … and they may be right.”

A look at past Russian Economic Forums shows how times have changed. The 2003 event was about western investment in Russia. Talk was about how western oil companies could repeat BP’s landmark deal with Russian oil company TNK. Yukos’s founder Mikhail Khodorkovsky was even seeking to bring Exxon Mobil into a merged Sibneft and Yukos. A year later a disenfranchised Khodorkovsky was in a Moscow jail, but BP’s Lord John Browne was still the toast of the 2004 forum. Last year, Medvedev vied with TNK-BP chief executive Bob Dudley. This year, Medvedev and Sergei Bogdanchikov, chief executive of Rosneft, Russia’s emerging state oil giant were unchallenged, with western bankers and business executives little more bowing courtiers.

Gazprom’s Miller made his threat after meeting 12 European ambassadors in Moscow. What other company can call in that kind of audience at short notice? When was the last time a listed company tried to dictate energy policy to a union of 15 of the world’s most powerful countries?

Mattias Westman, chief executive of Prosperity Capital, a leading Moscow-based investment fund told The Business: “There’s never been a company with Gazprom’s type of power. Not since the days of Standard Oil anyway and that was a long time ago.”

The UNITED KINGDOM has taken Gazprom’s bullying as a warning not to block any bid it might make for UK energy retailer Centrica. Gazprom has made clear it will not respond well if its efforts to control the European gas market right down to supplying directly to consumers are frustrated. UK Prime Minister Tony Blair quickly capitulated saying his government would not stand in the way should Gazprom bid for Centrica.

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