Russian natural gas market and Gazprom

Political-economic company analysis

Russian president Vladimir Putin makes strategic and political decisions regarding main state energy companies (Gazprom, Rosneft) on his own. These strategic decisions have been subsequently entrusted to the former vice-premier for energy complex Igor Sechin for realization (especially in oil sector). Executive positions in the state energy companies are held by Vladimir Putin’s friends (Alexei Miller, Valeriy Golubiev etc. in Gazprom) as well as by successful private energy companies (Surgutneftegaz, Novatek, Gunvor). 

Pipe-line, Russia; photo: CBAP

Market position

Gazprom produces around 80 % of natural gas in Russia and owns more than two thirds of the gas reserves. Currently, it holds a monopoly over domestic gas pipelines that transport natural gas to all Russian regions, CIS and more than 25 European states (The Russian Federation exported 203,94 mld. m3 of gas in 2011 (11% increase compare to 2010). The income was 58 473 bln. USD, which means a 34,3 % increase.) Domestic prices are going to be liberalized, however, the process is very slow and the whole transformation hasn’t reached the market level yet (full liberalization shall be finished in 2014, but any postponement can’t be ruled out due to the fear of negative social consequences). Gazprom holds a dominant position in the gas transportation, but not in the gas production. In the Russian natural gas sector, the role of the private company Novatek, connected to the businessmen Gennadiy Timchenko and Leonid Mikhelson, is rising (see below).


Profile of the company: Novatek

– The biggest gas production company in the Russian Federation after Gazprom: in 2011 Novatek produced 53,54 bln. m3 (over 6 % Russian production)

– Company has 1 321 bln. m3 of natural gas reserves

– Company earnings reached almost 6 bln. USD in 2011

– Main natural gas deposits are located in Yamalo-Nenetskiy avtonomnyi okrug (YNAO) and in western Siberia (Yurkharovskoe, Vostochno-Tarkosalinskoe and Khanchenskoe)

– Agencies rating (Standard & Poor’s and Fitch Ratings) is BBB- (stable).

– Novatek operates within very strong material, personnel and administrative resources: Novatek partner, stock holder (around 23 %) and member of the board of directors Gennadiy Timchenko is Putin’s friend, permanently living in Switzerland with alleged property around 25 bil. USD (according to some Russian media, which make him the richest person in post-soviet space). Timchenko allegedly served with Putin in KGB, he is alleged co-owner of oil intermediary Gunvor company, which became one of the three most profitable oil intermediary companies in the world during the Putin presidency.

– In addition to Timchenko, Leonid Mikhelson has a huge influence in the Russian energy complex (holds 30 % Novatek stocks and his property is estimated at 13.7 bln. USD – tenth richest person in Russia according to RBC Daily). Mikhelson has an ambition to become one of the most influential persons in the Russian gas market (he also held a high post in Stroitransgas, another Timchenko company)

-The interesting fact is that several board of directors members are actually linked to Gazprom or/and are still working in Gazprom: Burckhardt Bergmann (former director of German energy giant Ruhrgas AG), Andrei Akimov (see below) and Kirill Seleznev (see below).


Gazprom Strategy

– Position of global energy player: Economic expansion to European markets (30 % market share until 2030) and entering new markets outside the European continent (especially new markets in Asia)

– Building new gas pipelines under the seabed in order to strengthen the positions in European markets and defeat of competitive projects (Russian South Stream instead of EU gas pipeline Nabucco)

– LNG development

– Exploration of new gas deposits in the Arctic (Yamal, Shtokman), eastern Siberia (Kovykta, Chayandinskoye) and Far East (Sakhalin)

– Building of underground gas storage facilities (Gazprom intends to invest 200-300 mln. Euros for underground gas storage facilities with capacity of 5 bln. m3 until 2015)


Last development and prognosis

– Company approved 26 bln. USD investments for 2012, however, it’s quite possible that the final amount will reach 35 bln. USD.

– Net income in 2011 was 155 bln. USD (118,4 bln. USD in 2010).

– Gas exports to European markets should constitute 154 bln. m3 in 2012 (around 4 bln. more than in 2011), average gas price shall reach 415 USD per 1000 m3

– Gas production shall reach 513 bln. m3 in 2012 (it means that the amount of production is not rising in contrast to previous years)

– State control over Gazprom will continue in the next years and privatization (even partially) is not expected

– Gazprom will play a crucial role in Russian energy and foreign policy in the near future. The split in divisions of production and transportation is not inevitable and in the long-term, it would eventually help the international investors with the motivation for taking part in gas production (as an exchange for import of modern technology). The same motivation can be initiated also among domestic private gas production companies controlled by Putin’s friends (see Novatek).

SWOT analysis


– Dominant share in domestic gas market,

– Monopoly position in natural gas transportation and export,

– Rising potential for an increase in production,

– Political support for international expansion,


– Bureaucracy and inefficiency in decision-making,

– High investments into technological modernization are needed,

– Gas prices regulation for domestic consumers,


– Rising demand on the foreign markets,

– Price liberalization in domestic market,

– New unexplored gas deposits,


– Political interventions from the Russian state,

– Questionable reputation as a reliable gas supplier for European markets,

– Economic conflicts with the partner transit countries,

– Energy policy changes on behalf of state leadership,


Power relations and responsibilities inside Gazprom

– Gazprom is led by CEO Alexei Miller, Putin’s friend from his work in the Saint Petersburg mayoral office. All key questions, including appointment of Gazprom Department heads, are allegedly controlled personally by Putin. That’s the main reason why there is no hostile political clique inside Gazprom (as a result of political centralization in the country) or distorting connection to the individual politicians.

-State representatives on the board of directors are: Viktor Zubkov (vice-premier), Igor Yusufov (former minister of energy complex), Gazprombank CEO Andrei Akimov, former director of Russian property fund Farit Gazizullin and rector of The Russian Presidential Academy of National Economy and Public Administration Vladimir Mau.

– Gazprom top-management is unofficially divided to “political” leadership (ensuring the support of state authorities) and technical administrators, dealing with technical administration.

– The political section is led by Alexei Miller. This „political group“ in Gazprom is represented by Alexei Miller friends, who worked with him in Saint Petersburg in the 1990’s: Kirill Seleznev Member of the Management Committee, Head of the Gas and Liquid Hydrocarbons Marketing and Processing Department; Director General of Mezhregiongaz – He worked for Alexei Miller in the company Morskoi Port Sankt-Petersburg and Baltic Oil Pipeline System), Dmitriy Arkhipov (First Deputy Head of the Management Committee Administration – Head of the Internal Audit Department of the Management Committee Administration, also worked for Miller in BTS), Alexander Medvedev, Mikhail Sereda (Deputy Chairman of the Management Committee – Head of the Administration of the Management Committee, Gazprom, worked in BTS as a deputy director for financial issues), Elena Vasilieva (Deputy Chairwoman of the Management Committee, Chief Accountant – worked for Miller since 1996 in Morskoi port Saint Peterburg and then as Chief Accountant in BTS) and Alexandr Bespalov (Head of the Inormation and Communications Department – worked with Putin, Miller and Golubiev at St. Petersburg mayor office).

– The informal “technical group” was led by Alexandr Ananenkov (Ananenkov stayed in Gazprom as the board of directors member) until December 2011, Vitaliy Markelov (former director of Gazprom Transgaz Tomsk) was appointed to Ananenkov post of Management Committee Chairman, since June 2012 he works as Member of the Gazprom Board of Directors and Deputy Chairman of the Gazprom Management Committee. Together with Ananenkov, Viktor Ilyushin (former Head of the Relations with the Russian Federation authorities Department) and Olga Pavlova (Head for Property Management and Corporate Relations) were also removed from their posts – Ilyushin was replaced by Vladimir Markov (Ilyushin’s Deputy). Markov is former MP of United Russia in 2007-2011.

– The so called “siloviki” is a very powerful group in Gazprom (as well as in other energy companies) – former KGB/FSB officers that are usually overlapped with Miller’s “political group”: Valeriy Golubiev (Deputy Chairman of the Management Committee of Gazprom), Alexandr Medvedev (Deputy Chairman of the Management Committee, General Director of Gazprom export; Chairman of the Kontinental Hockey League Executive Board), Alexandr Kozlov (Member of the Management Committee of Gazprom and former director of Petersburg Fuel Company, founded in 1994, allegedly with the assistance of Vladimir Putin), Sergei Khomyakov (Deputy Chairman of the Management Committee, Director General of the Security Service) and Andrei Akimov (since 2011 member of the Gazprom Board of Directors, he is also Chairman of the Gazprombank Management Board, Member of the Novatek Board of Directors), who worked in Soviet and Russian foreign banks in Switzerland and Austria, specializing on Russian oil products purchase. Rumor has it that Akimov was actually an intelligence service officer (economic intelligence). Russian media calls Akimov the most mysterious and closed Russian banker. He regularly communicated with Putin until Igor Sechin started to prevent him from personal communication with the president. Akimov is allegedly grateful to Gennadiy Timchenko for his career (see Novatek), who met him before Akimov was appointed to the top-management in Gazprombank.

– Andrei Kruglov (Deputy Chairman of the Management Committee, Head of the Department for Finance and Economics of Gazprom) is said to be directly subordinated to Putin and also a protégé of Putin’s friend Matthias Warnig. Kruglov worked for a Dresdner bank branch in Saint Petersburg in the mid 90s, and in 1995-96 he worked in Putin’s Foreign Relations Committee. Warnig is a former officer of Stasi – secret service in communist Eastern Germany (under codename Arthur), who became the director of Nord Stream AG, possibly thanks to his friendship with Putin. In the second half of the 80s he met with Putin, then serving in KGB in Dresden. From March 1990 Warnig has worked in Dresdner bank AG structures. After 2003, he became a top-manager of the main Russian state energy companies and banks (VTB, Rosneft, Transneft). According to some resources, Kruglov takes part in very sensitive financial schemes under Putin’s control.

– Responsibility for the relations with state authorities and institutions are delegated to Valeriy Golubiev, Vlada Rusakova (Head of the Prospective Development Department), Sergei Pankratov (Deputy Chairman of Department for Strategic Planning) and Oleg Savchenko (Deputy chairman of the Department for Relations with state organs, political parties and public organizations).

– Gazprom has its lobbyists also in regional structures – its interests are represented by former Gazprom top-manager Fanuza Arslanova, who is the deputy governor of oil and gas rich Khanty-Mansiysk avtonomnyi okruh (KMAO) since 2010, after she had been appointed by her friend (and also Gazprom lobbyist, former MP), KMAO governor Nataliya Komarova.

– Gazprom operates several lobbyists also in the State Duma. Unofficial sources of information mention as key persons: Yuriy Lipatov (first deputy chairman of Energy Committee) and Valeriy Yazev (first deputy chairman of parliament Committee for natural resources and ecology).


Profile – Gazprom top-managers

– Alexei Miller is the most powerful from group of top-managers and businessmen in Russian energy sector.

– Two other Gazprom managers are also perceived as very influential: Alexandr Medvedev and Valeriy Golubiev.

– According to unofficial sources, Alexandr Medvedev was a KGB agent that worked under the cover of foreign Soviet banks until USSR dissolution. He maintains good relations with Igor Sechin (former vice-premier for energy and fuel sector and now head of state oil company Rosneft) and Mikhail Fradkov (former prime-minister, director of foreign intelligence service, SVR). In Gazprom he replaced Yuriy Komarov. Rumours describe Medvedev as an independent person with control over foreign financial operations.

– Valeriy Golubiev served in the KGB and later worked with Putin in the St. Petersburg mayoral office. Golubiev arranged the purchase of a flat for Putin in the prestigious Vasilievskiy raion in the 1990s and later he married the cousin of Nikolai Patrushev (former FSB director and Security Council general secretary). As a top-manager he deals with the relations with the state institutions and ministries where he uses his extensive ties to state authorities.

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Author: CBAP 2012; Photo: CBAP 2012