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. Last Updated: 07/27/2016

Gazprom Proposals in the FSC's Hands

A working group created to liberalize Gazprom's shares has submitted three competing proposals, and now it is up to the Federal Securities Commission to work out a compromise.

Members of the group — which include political and economic luminaries such as Deputy Prime Minister Viktor Khristenko and Deputy Finance Minister Bella Zlatkis — have each submitted their recommendations, which are now in the hands of Igor Kostikov, chairman of the commission.

The FSC is working on the final version, which is to be submitted to President Vladimir Putin for consideration once all of the working group's members have signed off on it.

Gazprom shares are traded in a two-tier structure, in which foreigners are prohibited from buying directly on the domestic market. Foreign investors are forced to buy American Depositary Receipts that trade at a 65 percent premium to local shares.

The State Property Ministry is suggesting that a "special-use company" be created to take orders from foreigners wanting to buy American Depositary Shares and from holders of domestic shares wanting to sell, Vedomosti reported Monday.

Foreign investors would still hold shares in the form of ADRs, but these ADRs could be sold on either foreign or domestic markets.

In addition, this government-controlled "special-use company" would charge a commission in stock instead of cash. The State Property Fund estimates that the government could add 0.83 percent to 1.66 percent of all outstanding shares to its ownership stake of 38 percent. Germany's Ruhrgas is the largest foreign shareholder with a stake of about 4 percent.

Even though official foreign ownership could potentially increase under the plan from 11.5 percent to the legal cap of 20 percent, the fundamental "ring-fence" market scheme that discriminates against foreigners will not change, say officials from the Anti-Monopoly and Finance Ministries.

Gazprom officials continue to support their own plan, which includes setting up special auctions through which foreigners could buy local shares.