Crisis Puts Gazprom Skyscraper In Doubt

The financial crisis might do what months of impassioned protests by St. Petersburg residents failed to accomplish — halt construction of a $2 billion skyscraper that would serve as the new headquarters for Gazprom Neft.

St. Petersburg Governor Valentina Matviyenko introduced an amendment to the city's budget that postponed investment in the Okhta Center for the first half of 2009, Vladimir Barkanov, chairman of the City Duma's budget and finance committee, said last week on 100TV, a local television station.

When contacted later by phone, Barkanov said the decision did not mean that St. Petersburg was pulling out of the project altogether.

"We have financed the Okhta Center for the last few years, putting in a set amount every half year," he said. "However, due to the current crisis, the funds the city had allocated to financing the project for the first half of 2009 will be redirected.

"The document on the city's participation in the project is still in full effect," he said.

Barkanov said the city would restart investment in the development once the economic situation improves.

St. Petersburg had allocated 2.9 billion rubles ($107 billion) for the first half of 2009 from next year's budget for construction of the 397-meter skyscraper, which is to be built near the Okhta River estuary, overlooking the city center. The building plans for the project are still under review.

The final price tag for the skyscraper is estimated at 60 billion rubles ($2.2 billion), of which 49 percent was to be financed by the city, with the rest coming from Gazprom Neft, the oil arm of Gazprom.

Despite Barkanov's assurances, some experts said the move was a sign that City Hall might be planning on ending its participation in the Okhta Center altogether.

"Often, when the city announces that it is 'temporarily' stopping financing, it means that they are exiting a project," said Alexei Fyodorov, director of the offices department at Maris Properties in association with Richard Ellis.

"You can't say that this building is absolutely necessary," he said. "This is more of an image project, and in times of crisis it's the image projects that are cut off first."

But when the economy does turn around, Fyodorov said, the development's high-profile status could draw the city back. "Okhta is a federal project, and the political will to get it done is very great," he said.

Sergei Kupriyanov, spokesman for Gazprom head Alexei Miller, said last week that the company would "continue fulfilling its part of the project," without directly commenting on the city's decision.

A spokeswoman for Gazprom Neft told Interfax last week that she had not received any documentation regarding the city's decision to delay funds.

Participants in the project remained confident that Gazprom would continue building the Okhta Center, even without the city as a partner.

"The project is highly important to Gazprom, and I don't think they will abandon it that easily," said Kirill Zavrazhin, a spokesman for Britain-based RMJM Architects, which designed the building. "Too much time and money has been spent on this to simply give it up."

Arabtec, the United Arab Emirates-based construction company that won the building contract, could not be reached for comment.

The Okhta Center became a lightning rod for controversy almost as soon as the details of the project were announced in December 2006. The building's design, reminiscent of an ear of corn, immediately spawned a host of nicknames, including "Gazochlen" (a reference to its phallic shape), "Gazo-skryob" (gas-scraper) and "Matviyenko's cucumber," in honor of its chief advocate.

Preservation groups were particularly vocal in their opposition to the tower, which would be almost eight times higher than the current official limit for buildings in the historical city center, a UNESCO heritage site.

"It would be great if the city stopped investing in the project," said Yelena Minchyonok, director of Zhivoi Gorod, an organization advocating the preservation of St. Petersburg's architecture. "The tower would be wildly different from the city's historic architecture. It would kill the skyline and violate a long list of zoning and building codes.

"City money is taxpayer money, and the city's taxpayers don't need this project at all," she said.

Opposition party Yabloko, meanwhile, has alleged that City Hall invested in the tower before any technical summaries, a land agreement or a contract between City Hall and Gazprom was finished. In April, a St. Petersburg court threw out a Yabloko lawsuit challenging City Hall's investment in the tower.

The city's decision to halt its funding drew a warm welcome from Yabloko.

"The governor said we should all 'tighten our belts,' and the refusal to finance the construction of the Okhta Center using funds from the city budget seems like the best step in that direction," Maxim Reznik, head of the local Yabloko branch, wrote on the party's web site.

"It was no secret that the city's residents found this particular project unpleasant. So if the budget is going to be cut, this seems like a very good place to start."

The crisis has not led the city to cancel all of its expensive construction projects, however. More than 10 billion rubles ($370 million) will be allocated from the city budget to build a stadium for local football club Zenit, which won the 2008 UEFA Cup, Deputy Governor Alexander Vakhmistrov told Vedomosti last week.

Gazprom owns a controlling stake in Zenit, and its president is Gazprom Neft chairman Alexander Dyukov.

Barkanov, the budget and finance committee chairman, denied that the funding for the stadium had been redirected from the Okhta Center.