Gas Monopoly Fuels, Finances Moscow's Might Russia's state-controlled gas monopoly is the world's largest producer of natural gas. Despite recent financial setbacks, Gazprom still pumps billions of dollars into the government's budget and plans to continue plans to expand its global reach.
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Gas Monopoly Fuels, Finances Moscow's Might

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Gas Monopoly Fuels, Finances Moscow's Might

Gas Monopoly Fuels, Finances Moscow's Might

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When Russia shut off the flow of natural gas to a neighbor the other day, it raised fears of an energy crisis in Europe. It also underlined the power that comes with Russia's natural resources. And that, in turn, calls attention to Russia's huge gas company. It's called Gazprom, and it plays a role in Russia's foreign policy. So, this morning we begin a series on Gazprom, and we start on the site of the company's biggest gas fields. They're in Yamal-Nenets, which is a remote region of Siberia. NPR's Gregory Feifer reports.

GREGORY FEIFER: The wind moves slowly over an endless landscape of stunted trees and snow. Temperatures here often reach minus 60 degrees Fahrenheit. This land may be inhospitable, but it's the source of much of Russia's new wealth.

(Soundbite of turbines pumping gas)

FEIFER: Inside a Gazprom processing plant, large turbines pump the Siberian gas into pipelines that stretch thousands of miles to Western Europe. This region produces 20 percent of the world's entire output of natural gas. Gazprom is among the few employers in the region, and wages are relatively high. But electrician Sergei Kompaniets says there's another reason he's proud of his job.

Mr. SERGEI KOMPANIETS (Electrician, Gazprom): (Russian spoken)

FEIFER: Gazprom is a world leader. The entire country depends on us, he says. Gazprom is Russia. Gazprom used to be the world's third biggest company, but that was before the global financial crisis cut its share value by 75 percent. A predicted drop in gas prices next year will deal another blow. Even so, thanks to long-term supply contracts, Gazprom still earns billions of dollars, and it's the main pillar of what's called Kremlin Incorporated.

More than a thousand miles away in Moscow stands a towering glass-paneled skyscraper. This is the headquarters of Gazprom. More than just a gas supplier, it's also a bank, an oil firm, and a media company.

The building behind me is the center of Gazprom's business empire, which has also become a key tool of Russia's foreign policy. The company's stranglehold on European energy supplies is central to Moscow's strategy for muscling its way back on the world stage. Most analysts believe this company is so interlinked with the Kremlin, on the other side of town, there can be no serious discussion of its independence.

Gazprom was originally created from the old Soviet gas ministry by former Prime Minister Victor Chernomyrdin who became a billionaire almost overnight. After Vladimir Putin came to power, he put Gazprom firmly under Kremlin control by appointing loyalists from his hometown, St. Petersburg. One of them, Dmitri Medvedev, was made chairman. He's now the president of Russia.

Putin based his doctoral thesis on the argument Russia should use its energy industry to promote the state's interests. But energy expert Konstantin Simonov says in Russia, political leaders treat state assets like their own personal property.

Mr. KONSTANTIN SIMONOV (Russian Energy Expert): Putin is thinking about Gazprom as about his company. And that is why we can say that of course Putin is number one in Gazprom.

FEIFER: Putin supporters dispute the widely held belief that Russia's former president, now prime minister, calls the shots at Gazprom. His former energy minister, Victor Khristenko, insists Gazprom is no different from any Western energy company.

Mr. VICTOR KHRISTENKO (Former Russian Energy Minister): (Through Translator) It's not a state company. It's a private company in which the state just happens to have a controlling stake.

FEIFER: But those who study Gazprom say the company's profits are controlled and, many believe, siphoned off by shady Kremlin connected financial and trading structures. There are also concerns about where Gazprom is going to find the gas to fill its foreign contracts. Gazprom has already been forced to buy cheap gas from central Asia to make up for falling domestic production and might soon have to cut back on supplies to Russian consumers.

Back in Yamal-Nenets, inside the modest offices of a Gazprom subsidiary, Deputy Director Anatoly Sorokin admits production will decline in 2009.

Mr. ANATOLY SOROKIN (Subsidiary Deputy Director, Gazprom): (Russian spoken)

FEIFER: But Sorokin says he's confident Gazprom is spending enough on production and exploration of new gas fields. Despite its supply and financial problems, Gazprom is not scrimping on expanding its network abroad. Even as the company appealed for government aid, Gazprom announced it would go ahead with plans to spend tens of billions building two new pipelines to the west. That would further deepen foreign dependence on Russian energy and make Gazprom even more powerful. Gregory Feifer. NPR News, Yamal-Nenets.

INSKEEP: So, that's Siberia where the gas comes from. And tomorrow we'll go where some of Russia's natural gas is consumed. It's Germany, where some think Gazprom's deals affect relations between Russia and this major ally of the United States.

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