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. Last Updated: 07/27/2016

Gazprom Follows Kremlin Lead on PR Front

The world's largest gas company has a problem.

It's not that reserves from old fields are dwindling as production from new ones stagnates. Nor is it a series of damaging disputes with neighboring countries that has called into question Russia's ability to send steady supplies to Europe.

Gazprom's main problem, it would seem, is PR.

"We don't get enough objective press," said Sergei Kupriyanov, Gazprom's chief spokesman.

To that end, the state-run gas monopoly has hired a new trio of international PR firms in a bid to soothe its image in the Western countries where it is increasingly hoping to do business.

In so doing, Gazprom has decided to let go of PBN, a PR firm focusing on the former Soviet Union, in favor of a three-member consortium that includes two firms currently advising the Kremlin on their relations with the West.

The Kremlin first hired New York-based Ketchum and Brussels-based GPlus to boost the country's image while it held the G8 presidency last year, and it extended the mandate this year.

The trio also includes consortium leader Gavin Anderson, a British PR firm, and has been working with Gazprom since mid-June, said Ken Cronin, Gavin Anderson's managing director. All three companies belong to Omnicom Group, a U.S. communications holding company that brought in some $11.4 billion in revenue last year.

Cronin said the hiring of the new team "reflects the wishes of Gazprom to communicate to all their stakeholders effectively."

Gazprom first hired PBN, along with another two companies, Penn, Schoen & Berland Associates and Hill & Knowlton, in January under what Kommersant reported at the time was a three-year contract. Gazprom planned to pay the firms $11 million in 2007, the newspaper reported.

All firms involved in the new deal declined to comment on its financial terms.

Speculation has swirled that PBN, which worked with Gazprom from January through March, was let go because of the firm's links to Juri Estam, a vocal Estonian nationalist who has worked as a consultant to the firm from Tallinn.

Estam has written widely in Estonian newspapers and blogs, attacking Russian interests in Estonia and speaking for the controversial decision to move the Bronze Soldier, a statue commemorating Soviet efforts in Estonia during World War II.

PBN senior vice president Thomas Blackwell said the firm had completed a three-month contract with Gazprom and denied plans for a more long-term deal.

"The whole Estonia connection is a total fabrication," Blackwell said, adding that Estam had never been a regular employee with PBN. "What he may or may not have done on his own time isn't the firm's business."

Industry insiders speculated that Gazprom was instructed to go with a consortium that included Ketchum to ensure that its communications with the West would flow seamlessly with the Kremlin's.

"The association will be that Gazprom remains a part of the Russian state," said Yevgeny Fokin, director of international media relations at Mmd, a PR consultancy that works closely with state-controlled oil firm Rosneft.

Rosneft has emerged the victor in the dismantling of Yukos, winning the company's production assets in a series of auctions. Yet it is Gazprom that has benefited most from the Kremlin's push to ensure that major oil and gas projects fall into Russian hands, taking majority control of Sakhalin-2 from Shell and Kovykta from TNK-BP.

But the image problems faced by Gazprom, a massive concern that employs 400,000 people and was formerly known as the Soviet Gas Ministry, date back further.

The memory of Gazprom's pricing dispute with Kiev in January 2006, which prompted the firm to cut gas supplies to Ukraine and Europe briefly, remains fresh, said Tim Lambert, vice president at British energy consultancy Wood Mackenzie.

In that dispute and January's dispute over oil pricing with Belarus, the Kremlin was accused of using the firms it controls as proxy foreign policy tools.

Gazprom's push to improve its image comes as the company faces fierce opposition to moves abroad.

"They're looking to consolidate their position in European markets and to diversify into new ones, like the United States," Lambert said. "Parts of the West see Gazprom as a monopoly superpower that clamps down on weaker neighbors and are worried the same could happen to them."

Long-standing rumors that the monopoly is seeking to take over Centrica, Britain's largest gas utility, cause continuous uproars in that country's press.

Both Kremlin spokesman Dmitry Peskov and Nicholas Scibetta, a senior vice president at Ketchum, declined to comment on how the strategy for Gazprom and the government would be coordinated. "Every company of scale needs to communicate data to business circles, to public opinion, in a proper way," Peskov said. "Their cooperation with a global PR consortium is quite understandable."

Yet other PR officials warned that all firms, including a behemoth like Gazprom, required more than image-management to improve their reputations.

"The most important thing is that the company that wants to improve its image has to be really committed to improving itself -- to use just a PR trick will not work. The company needs to change itself internally," Mmd's Fokin said.

Kirill Babayev, a vice president in charge of external relations at Alfa Bank's telecoms arm, Altimo, who has written widely on the use of PR in Russia, agreed. "The image of Gazprom is far from brilliant -- it will require much time and effort," he said. "They need to work along with Western business standards and practices as well as with PR."

And Babayev said he believed not all blame lay with Gazprom.

"In the West, there is generally quite a negative perception toward Russian business as immature, as quite criminally backed. Many people are just afraid of dealing with Russia," he said. "We must explain that times have changed."