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From Forbes Magazine: Energy Tsar Energy Tsar

From Forbes Magazine
On The Cover/Top Stories 
Michael Freedman and Heidi Brown, 07.24.06
Vladimir Putin is using publicly traded Gazprom, and its monster reserves, to remake Russia. Should you own a piece of it?

On a recent morning Alexei Miller, head of Russia’s OAO Gazprom, the world’s largest public energy company by reserves, strode toward a lectern in a standing-room-only convention hall in Amsterdam. There to deliver a keynote address to leaders of the world’s foremost oil and gas companies and investors, Miller locked eyes with the crowd and said icily, in English, “The speech will be in Russian.” At that, scores of executives rushed to the exits, tripping over one another to get headphones for a translation. Miller stood alone at the lectern, scowling into the spotlight.

The crowd returned moments later for the speech, a 30-minute overview of the company’s plans. But the incident underscored the contradictory faces of the sixth-most-valuable company on the planet as it lurches toward Western-style capitalism. There’s the slick salesman who needs billions of dollars in capital and technical know-how from the outside in order to exploit a quadrillion cubic feet of proven natural gas reserves (50 years’ U.S. consumption) and 300,000 miles of pipeline crisscrossing Russia from the Baltic border east to Tomsk in Siberia and from Uzbekistan north toward the Arctic Circle. And there’s the clumsy beast, wounded by its own history of cronyism and corruption but proud enough to insist on its own rules. These twin incarnations constantly vie with each other.

Whatever Gazprom turns out to be, it is today a formidable force. Though still inefficient and scandal-prone, the company provides most of the gas to former Soviet states and to central Europe, as well as 25% of the needs of western Europe. Since Miller took over in 2001, the company has increased earnings from $440 million to $13.5 billion, on $56 billion in sales. It has announced one deal after another and is discussing a pipeline to Japan and a joint venture in Iran. By 2010 it expects to send gas in liquefied state from reserves near the Barents Sea to ports in the U.S. And the company is looking eastward, too, with plans to build pipelines to China. In a decade, executives insist, Gazprom’s market cap will exceed $1 trillion.

Despite his title Miller is the second-most-important figure involved with Gazprom. Number one is the 53-year-old president of the Russian Federation, Vladimir V. Putin, who takes center stage at the Group of 8 summit beginning July 15 on his home turf in St. Petersburg.

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