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. Last Updated: 07/27/2016

THE ANALYST: Its Eye on Politics, Gazprom Expands Its Media Holdings




Something happened a few weeks ago that most observers in the Western media missed. In the second week of January, right after the Orthodox Christmas holiday, the country was informed of the creation of what promises to be a stellar holding company -- Gazprom-Media. For those who anathematize the marriage of industry and the press, this two-word jingle should send a morbid chill down their spines. But for Prime Minister Viktor Chernomyrdin, the establishment of Gazprom-Media is the first step in preparing for his ascendancy to the Kremlin in a little over two years.


As its name implies, Gazprom-Media (let us refrain, for obvious reasons, from using the abbreviation GM) is a wholly owned division of Gazprom, which will unite all the company's media holdings in order to manage them more effectively. Hard as it may be to believe, no one knows just how big this new entity is: Gazprom owns dozens of stakes in regional newspapers and television stations through its subsidiary enterprises, but no single listing of these stakes exists. Thus the primary task for Gazprom-Media managers will be to compile a comprehensive inventory of all Gazprom media acquisitions, which ostensibly will take weeks. Nonetheless, some of these holdings are well-known, such as 30 percent in NTV, one of Russia's premier television stations, and a 3 percent slice in ORT, which, as was promulgated last week, is now controlled by Boris Berezovsky.


Once Gazprom-Media executives have a comprehensive list of what they own, they will shore up control and knuckle down on managing the stakes. Gazprom doesn't hide the fact that it has been lackadaisical in this regard, frequently doling out management responsibilities to outsiders. For example, the 30 percent interest in NTV was placed under the trust management of Media-MOST, part of the MOST-Group. To get the job done and turn Gazprom-Media into a top-notch operation, Gazprom CEO Rem Vyakhirev knew he would need someone who is goal-oriented and politically connected. His invitation was sent to Viktor Ilyushin, former senior adviser to President Boris Yeltsin, and an individual who has mastered all the intricacies of domestic and international politics. Ilyushin, who also understands the delicacies of interviews and making public statements, did not conceal the ulterior motive behind the creation of Gazprom-Media. "It is difficult for people who live in the provinces to gain an understanding of politics," he said, before asking almost rhetorically, "Why shouldn't we bring them an understanding of these issues?" His words have two lucid implications: First, that the holding company is interested in exerting influence, and second, that its origin is founded in politics.


Politics notwithstanding, Gazprom will give its media underlings plenty to write about on the business page. Russia's largest company continues to expand -- both horizontally and vertically -- to the extent that expansion is beginning to seem like an obsession. Last week, Vyakhirev signed on the dotted line along with Italy's ENI for the development of a number of deals worth a total of $3 billion, in particular the exploitation of gas deposits in Astrakhan, northwest of the now legendary Caspian Sea. Last week the company finally confirmed it has acquired what amounts to a controlling stake in Promstroibank, its fourth major financial interest (in addition to Gazprombank, National Reserve, and Bank Imperial). Vyakhirev said that Gazprom will buy a stake in one more financial institution in order to satisfy the company's banking needs throughout the regions, although he refused to name which bank. The rumor on the market is that it could be Inkombank, which would be nothing less than sensational.


No less newsworthy are the company's ambitions abroad. Despite objections from the United States, Gazprom has sent unequivocal signals that its investment project in Iran will continue, and the company has the full faith and backing of the president and his ministers in this regard. Now that the company has decided to drop out of the Turkmenistan pipeline project to Afghanistan, Gazprom needs Iran more than ever, especially to play off the obstinate Turkmeni leaders. And if U.S. banks are barred by Senator D'Amato from leading a multibillion-dollar convertible bond issue, then Gazprom will just line up European banks. The greatest always have the luxury of choice.


1998, as one can see, will be an outstanding year for Gazprom. The company is ready to launch Russia's first domestic corporate bond (which has been prepared by Bank Imperial), the first results from its international reserves audit are soon to be promulgated, and construction of the Black Sea pipeline will begin later this year -- ahead of schedule. Investors on the Moscow Stock Exchange reacted euphorically to all this action by setting a record 715 deals with Gazprom stock last Thursday for a total of almost $6 million. True, this is one-third less than RTS' best Gazprom days last year, but just give the company a bit more time.


Gary Peach is the editor of the weekly newsletter Capital Markets Russia.