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. Last Updated: 07/27/2016

Gazprom Recovers 5% Stake

Gazprom claimed a major victory Wednesday in its campaign to recover assets lost under previous management by clawing back control of a $1 billion stake sold cheaply to insiders.

The gas giant said the Moscow arbitration court had ruled that a 4.83 percent stake of Gazprom shares, transferred in 1995 to Gazprom's main pipeline builder Stroitransgas for just $2.5 million in cash, should be returned.

Stroitransgas, which has acknowledged in the past that Gazprom's former managers and their relatives were among its main shareholders, declined to comment.

Stroitransgas has previously said it received the stake in Gazprom in 1995 as payment for construction work, which annually amounted to about $1.5 billion, in addition to the $2.5 million cash payment.

The state owns 38.37 percent of Gazprom, and Gazprom's own subsidiaries control about 10 percent. The return of the 4.83 percent stake from Stroitransgas would therefore give the state effective majority control of the world's largest gas producer.

"This means that the government is now free to liberalize the share market [in Gazprom] as it does not need to buy any more cheap local shares to ensure control," United Financial Group said in a daily note to clients.

A complicated chain of laws and presidential decrees, the "ring-fence," imits foreign trade in Gazprom.

Local shares closed up 4.98 percent at 33.91 rubles ($1.085) on the news.

Gazprom CEO Alexei Miller, named by the Kremlin last year to replace veteran boss Rem Vyakhirev, has promised to investigate allegations by minority shareholders that Gazprom management sold off assets to insiders.

One of Miller's first steps to recover lost assets was a decision to buy back Purgaz, a unit with gas reserves of 500 billion cubic meters, close to Gazprom's current annual output. Gazprom's own reserves stand at more than 20 trillion cubic meters.

Gazprom bought back a controlling stake in Purgaz for $186 million in April from gas trader Itera, whose links with Gazprom and apparent favored treatment by previous management were criticized by minority shareholders.

In March Gazprom also regained control of its petrochemical subsidiary Sibur by reshuffling management to win a majority on the board.

Gazprom's ousted management denies asset stripping and Vyakhirev retains the honorary post of company chairman, although he has said he will resign this year.