Gazprom, Once Mighty, Is Reeling (Russian Natural Gas Monopoly)

[RamboLiberal]

Source: NY Times

MOSCOW — A year ago, Gazprom, the Russian natural gas monopoly, aspired to be the largest corporation in the world. Buoyed by high oil prices and political backing from the Kremlin, it had already achieved third place judging by market capitalization, behind Exxon Mobil and General Electric.

Today, Gazprom is deep in debt and negotiating a government bailout. Its market cap, the total value of all the company’s shares, has fallen 76 percent since the beginning of the year. Instead of becoming the world’s largest company, it has tumbled to 35th place. And while bailouts are increasingly common, none of Gazprom’s big private sector competitors in the West is looking for one.

That Russia’s largest state-run energy company needs a bailout so soon after oil hit record highs last summer is a telling postscript to a turbulent period. Once the emblem of the pride and the menace of a resurgent Russia, Gazprom has become a symbol of this oil state’s rapid economic decline.

During the boom times, Gazprom and the other Russian state energy company, Rosneft, became vehicles for carrying out creeping renationalization.

As oil prices rose, so did their stocks. But rather than investing sufficiently in drilling and exploration, Russia’s president at the time, Vladimir V. Putin, used them to pursue his agenda of regaining public control over the oil fields, and much of private industry beyond.



Read more: http://www.nytimes.com/2008/12/30/business/worldbusines...

[Baby Snooks]

1. But it has assets to justify a bailout...

It has incredible reserves of natural gas. What goes down, goes up. Russia will survive. As will China. We however will not.

[naaman fletcher]

3. that silly..

Sure, prices fluctuate.. but when you borrow tons at high prices.. you will be screwed when they go down. That is what has happened to Gazprom, and many other resource rich states i.e. Dubai.

[Baby Snooks]

5. You forget...

OPEC has the power to set its own prices as well as set levels of production. It just hasn't done so in awhile. Normally it doesn't set prices. It merely cuts production.

Russia can do the same. And most of Europe at this point is actually dependent upon natural gas from Russia.

My real point is there are assets. The only assets of the corporations in this country that are being bailed out are the taxpayers.

The same thing with China Oil and the various subsidiaries. Of course China also has Hong Kong. So it's really not that worried. They can raise taxes and fees in Hong Kong and probably buy Wall Street.

There is a new world order coming. Just not the one the Bushes and all their cohorts on Capitol Hill thought was coming.

We are a falling empire. Our greed in the end did us in. Just like Benjamin Franklin predicted it would.

[tama]

4. What is left unsaid

is what should worry most. Gazprom says it's NG production has peaked.

[Demeter]

2. Natural Gas Futures Below Last Year's Rates

and that's why Gazprom is sweating. They made plans based on high prices and got shafted.

[Dover]

6. Gazprom Warns Europe on Gas

MOSCOW — Russian energy giant Gazprom warned European clients Friday that its gas conflict with Ukraine, conduit for European-bound gas from Russia, could affect deliveries to Europe.

The warning came in a letter from Gazprom chief Alexei Miller to the company’s European clients.

“Gazprom is doing everything possible to avoid any disruption of gas deliveries to Europe,” said Miller in the letter cited by Interfax news agency

..snip..

We do not have any aim to cut it off. Our aim is just to get our money,” he said in a Russian television interview.

“But if Ukraine does not pay we will use a whole arsenal of possibilities and it is completely clear that there can be no illusions there.”..cont'd

http://www.sptimes.ru/index.php?action_id=2&story_id=27...


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Putin says Russia's goals remain despite crisis

http://article.wn.com/view/2008/12/29/Putin_says_Russia... /

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Putin says era of cheap gas is over

When Prime Minister Vladimir Putin said the era of cheap gas was over, the West feared it was a start of an economic war. In fact, it was a desperate gesture. On Wednesday chief Kremlin economist Arkady Dvorkovich said Russia would have a deficit budget in 2009, the first time in a decade.
However, the EU may suffer too if it ignores the warning and fails to bring Ukraine, its partner in

European integration, to its senses.
Putin said correctly that energy could no longer be cheap because production costs are huge. Leonid Grigoryev, one of Russia's most respected analysts, said the development of oilfields is profitable only if crude costs at least $60 per barrel. And the same, or almost the same, goes for natural gas, he said.

This means that the Russian authorities' room for economic maneuver is rapidly shrinking.
Moscow has been trying to increase it, but made a major mistake before the Russian-Ukrainian gas conflict in 2006. It should have explained to the EU that Ukraine's refusal to pay up would backfire on Europe. The Kremlin has taken this into account now, and Energy Minister Sergei Shmatko has openly encouraged the EU to force the Ukrainian officials, busy fighting among each other, to pay the gas debts or prepare for gas supply problems.
Unfortunately, Europe may misunderstand Russia's broad hint, because the friend-foe inertia still prevails there. Europeans cannot admit that "authoritarian" Russia may be right in its conflict with "democratic" Ukraine. This promises to be the economic equivalent of the Caucasus war in January...cont'd


http://en.rian.ru/analysis/20081225/119175754.html