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. Last Updated: 07/27/2016

Miller Hints at Bigger Foreign Stake

Gazprom declined Monday to comment on reports Kremlin advisers will recommend that foreign investors be able to hold shares currently reserved for Russians and approve raising foreign holdings to 20 percent.

Analysts said raising the limit to 20 percent was realistic, but saw a slow approach to bringing down the ring fence that allows foreign investors to buy only London-quoted American Depositary Shares and not Gazprom's domestically traded stocks.

Germany's Handelsblatt newspaper Monday quoted Gazprom CEO Alexei Miller as saying the group supported increasing the proportion of share capital available to foreigners to 20 percent from around 11 percent at present.

A Gazprom spokesman said no one was available to comment on the remarks, which came ahead of a report by the advisory group, expected this week.

Hopes were raised the group would approve liberalizing ownership of the shares after Miller's appointment as boss in May. He has called for more transparency and is seen as backing a restructuring of the state-controlled giant.

Renaissance Capital oil and gas analyst James Henderson said he also expected the foreign limit to be raised to 20 percent and saw support inside the company for lowering the ring fence. "But the real question is one of timing. President [Vladimir] Putin can raise the limit on the foreign stake to 20 percent just by signing a decree, but bringing down the ring fence will not be so easy," he said.

Henderson said gray schemes had already taken foreign holdings in Gazprom to as high as 18 percent and that a 20 percent limit would therefore be reached quickly. He said it was likely the state, which owns 38.37 percent of Gazprom, would raise limits on the foreign stake to above the 20 percent level.

Foreign investors have also been annoyed by the fact that the shares they officially have access to, the ADS stock, are more expensive than local shares.

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Gapzrom ownership is restricted because it is considered by the government to be a strategic asset. It accounts for 25 percent of world gas output and 8 percent of Russia's GDP.

Vedomosti newspaper Friday quoted sources as saying the working group supported allowing foreigners to directly buy Gazprom shares, but would advise limits on trading floors open to the paper. One source said a single depositary to audit ownership of the foreign stake was likely.