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Wednesday, December 13, 2006

Russia Refuses to Break Up "Golden Egg-Laying" Gazprom

Dmitry Medvedev / Photo: Itar-Tass 11.12.2006 - MosNews - Russia’s First Deputy Prime Minister Dmitry Medvedev said on Friday, Dec. 8, that the country’s authorities will no break up energy giant Gazprom into smaller companies, because such a move would reduce its ability to compete on the world market and damage a key source of budget revenue. Medvedev was quoted by RIA Novosti as saying: “If it is divided into several parts, there will be many players, and they will be unable to compete with foreign companies.” “Why should the state kill the goose that lays golden eggs?” he said. “Gazprom is a unique mechanism that took a long time to evolve, and its destruction could have catastrophic consequences for our entire country.” Medvedev said every effort should be made to strengthen Gazprom, which could emerge as the world’s largest company in terms of capitalization, as well as a key player on energy markets all over the world. The company’s market capitalization has grown from $9 billion in 2000 to $270 billion in 2006, and could reach 280 billion by the start of 2007, he said. In early 2007, the EU is set to announce measures to make energy companies’ operations more competitive, and to weaken the dominant positions of monopolies, proposals which have met with criticism from state-run Gazprom, the EU’s largest natural gas supplier. Russia’s President Vladimir Putin gave reassurances last month that Gazprom and other state monopolies will not be separated into smaller companies. Speaking after a meeting with European Union Commission President Jose Manuel Barroso at the Russia-EU summit in Helsinki, Putin said: “As long as there remains a disparity in energy prices on the Russian and world markets, we will preserve the integrity of such companies as Gazprom.” Putin said any changes to Gazprom’s organizational structure are a matter for Russia alone to decide. The European Union has been trying to persuade Russia, to sign the Energy Charter Treaty, which would force the country to liberalize its oil and gas sector. Russia opposes the idea, saying that some of the document’s provisions — such as opening access for European companies to its pipelines — run counter to its interests.

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