The Gazprom Dog-and-Pony Show

It is futile to attempt to sell an idea or to prepare the ground for a product that is basically unsound," wrote Edward Bernays, the father of public relations, in his 1928 book "Propaganda."

Despite these words of caution, a number of Western PR companies have taken on the daunting task of trying to not only sell a new image of Gazprom to policy and opinion makers in the West but, more important, to help Gazprom get listed on the New York Stock Exchange.

The current effort includes hiring the PR firms Ketchum and GPlus, which were brought on to boost the country's image when it hosted the Group of Eight summit in 2006. Gazprom is also being advised by Gavin Anderson, a British PR firm. All three companies belong to Omnicom, a U.S. communications holding company.

News of Gazprom's intent to list on the NYSE came in the spring of 2006 during a visit to the exchange by Finance Minister Alexei Kudrin. NYSE Group president Catherine Kinney said at the time: "The NYSE is proud of our partnership with Russia and our growing list of Russian listed companies. We look forward to expanding our relationship with Russia."

Unlike the London Stock Exchange, however, the NYSE has much stricter rules on transparency and governance, two areas that could easily disqualify Gazprom's bid. Gazprom management chose to conduct a public relations campaign, hoping that this would be an easy, painless alternative to the serious reforms that need to be instituted to fundamentally change the way the company operates internally and externally.

In early December, Alexander Medvedev -- the deputy chairman of Gazprom, the head of Gazprom Export and a member of the board of RosUkrEnergo, a joint company between Gazprom and two Ukrainian businessmen that buys Central Asian gas from Gazprom to resell to Ukraine -- was dispatched to the United States to help the campaign pick up steam.

In New York, he met with NYSE officials and reassured them that he represented the new, transparent Gazprom -- a Gazprom with a human face.

From New York, Medvedev went to Washington, where he held a panel discussion organized by the Center for Eurasian, Russian and East European Studies at Georgetown University.

The discussion turned out to be nothing more than a cheerleading rally full of unabashed praise for Gazprom by U.S. academics, businessmen and a former director of Yukos. Gazprom, they claimed, was not only sincere and honest in its intentions, but it was as transparent as a shot glass of chilled vodka.

European concerns about energy security were ridiculed by the U.S. panelists, and anyone slightly critical of Gazprom was dubbed an unrepentant Cold Warrior.

Medvedev was asked about the dealings of RosUkrEnergo and whether it was common practice for Gazprom to enter into a multibillion-dollar business partnership with individuals whose identities it didn't know. He coolly responded that the company was created at Ukraine's insistence and that Gazprom was forced to accept the deal. But it takes two to tango, and many in the audience did not quite believe that Ukraine was in any position to dictate terms to Gazprom.

Medvedev also said he would prefer to deal directly with Ukrainian customers and not through a middleman, who should be eliminated. Two days later, a new gas agreement was signed between Ukraine and Gazprom, and RosUkrEnergo remained as the middleman. As a result of the agreement, Medvedev's Gazprom Export will continue to earn commissions of about $50 million a year from the opaque scheme.

The Gazprom cheerleading show was repeated with some variations a week later at Columbia University, where former German Chancellor Gerhard Schr?der took to the podium to lobby for Russia and Gazprom, his current employer.

Schr?der talked up how reliable Russia -- and by definition Gazprom --was as a supplier of gas to Europe. "Let me base my answer on the experience that we as Germans have had in dealing with Russian energy suppliers," Schr?der said. "Germany has never had a problem with the supply and integrity with the energy imported into Germany from Russia, not during all of the fickle times of the Cold War, not right now, and I personally don't anticipate them in the future."

As the shrillness of the sales pitch grew, President Vladimir Putin added muscle to the effort by announcing that his heir would be Dmitry Medvedev, Gazprom's chairman.

By naming Dmitry Medvedev as his preferred presidential candidate, Putin did his share to help promote the listing of his favorite company on the NYSE. Dmitry Medvedev, after all, is perceived by many influential people in Washington, New York and London as a "Westerner." This is strangely reminiscent of the opinion held by many in Washington that Yury Andropov, the former KGB chief, qualified as a "liberal" because he enjoyed jazz and drank single malt Scotch whiskey.

The projected public image of Dmitry Medvedev and his wife, who is involved in charity work, could well be a legend crafted by the Kremlin's image-makers to inspire confidence in a man who will most likely be the next president. He is, we are led to believe, a man dedicated to free enterprise and the rule of law, someone who will not confront the West -- unlike many of his less-enlightened comrades in the Kremlin.

Only time will tell whether this is an accurate profile of the man or whether it is merely a ploy to play on the wishful thinking of Western politicians starved for good news from Russia.

The subtle PR message being offered to the West is that Medvedev, a cultured, soft-spoken lawyer, would never allow Gazprom to become a poorly managed, corrupt or opaque company. Thus, all the loose talk about the murky nature of Gazprom is pure conjecture and libelous accusations spread by its enemies. Therefore, the company must be allowed to list on the NYSE.

It remains to be seen whether the new president of Russia, whoever that might be, will insist that this PR campaign be matched by a move toward greater openness and responsible practices in Gazprom. It is also unclear whether the Kremlin and Gazprom will stop using gas as a tool of foreign policy.

Public relations can produce miraculous results if the product being sold is a quality one. With the assistance and guidance of top PR firms, Gazprom is able to "talk the talk" of transparency, but convincing the world that the company truly has good corporate governance will be much tougher to accomplish.

Public relations will not change the way a company operates, only how it is perceived. Legendary U.S. actor Errol Flynn once said something that Alexander Medvedev and other Gazprom managers should commit to memory:"It isn't what they say about you, it's what they whisper."

Roman Kupchinsky is an analyst for Radio Free Europe/Radio Liberty in Washington.