Giant Gazprom

The New York Times has an informative article on Gazprom, the giant Russian gas company.

You may be surprised at just how large Gazprom is.

But even as Gazprom closes in on BP, now the world's second-largest energy company after Exxon Mobil, critics say it is hardly a model for Russia's future. "This is not why we had reforms in the 1990s," said Yevgeny G. Yasin, a former minister of economy. "This is a little like the Soviet Union."

He added, "This is a questionable solution because the government will dictate political and not economic decisions."

Gazprom emerged in the early 1990's from the former Soviet Ministry of the Gas Industry — privatized in part, but still under state control — and inherited more than the ministry's core operations. It also inherited its piece of the Soviet Union's paternalistic economy, in towns and settlements stretching from the Arctic gas fields to those along the maze of pipelines leading south.

Gazprom employs 330,000 people at major divisions for exploration, pipelines and export sales, as well as a division for its newly acquired oil company, Sibneft, a banking arm, a media company and hundreds of subsidiaries. It generated profits of $4.6 billion on revenue of $28 billion in 2004, the last year for which audited results are available.

It's reach extends beyond just the energy market.

Gazprom built homes, roads and sports centers. It even guaranteed that groceries would be available in the stores by forming its own agricultural holdings. As once-proud Soviet collective farms failed and foreign imports overwhelmed Russia's domestic production, Gazprom stepped in with financing and became the biggest single owner of agricultural land in Russia.

The company's footprint has grown even beyond farms to include a manufacturer of mining equipment, banks, a porcelain factory and, as of mid-April, a new radio station called Relax FM, playing easy-listening pop and rock from the West.

While executives say they intend to shed the company of noncore assets and other Soviet-era burdens, Gazprom continues to make investments that seem to have a political motive more than a corporate one.

Last year, for example, it expanded its media holdings with the acquisition of Izvestia, one of the most influential national newspapers. It also bought a soccer team, Zenit, in St. Petersburg and announced recently that it would move the headquarters of Sibneft, the oil company once slated to merge with Yukos but now absorbed into Gazprom, to St. Petersburg, the former capital. The latter move fit into a stated policy to step up investment in St. Petersburg, where Mr. Putin and many of his closest aides once lived and worked.

[Its media arm is now in talks to buy one of the largest-circulation newspapers, Komsomolskaya Pravda, and an associated publishing house for as much as $300 million, Vedomosti, a Russian business daily, reported April 20.]

Gazprom has become an instrument of Russian foreign policy, and their leadership reflects it.

I've remarked before how the chief executive, Alexsei Millier, is one of Putin's circle going back to their St. Petersburg days.

The chairman of Gazprom's board, Dmitri A. Medvedev is the former Kremlin chief of staff and the current first deputy prime minister. He is one of the possibilities to replace Putin. (And there has been speculation Putin might become the head of Gazprom when he leaves office, though so far Putin has been coy on that front.)

This giant company has levers big enough to move nations. When discussing Russia's future, and its relations with other states, any mention of Gazprom won't be far behind.