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Gazprom’s On-Going Saga

An interesting article from the New York Times on Gazprom’s recent activities. Last week, Dmitri A. Medvedev, Gazprom’s current chairman, was sworn in as Russia’s president. He succeeds Vladimir Putin, who will become prime minister. The current prime minister, Vickor A. Zubkov, is expected to replace Mr. Medvedev as chairman of Gazprom at the company’s annual shareholders meeting in June.

As the article illustrates, Mr. Putin used his tenure as Russia’s president to reassert the government’s direct control over Russia’s vast energy resources. Reflecting this consolidation, Gazprom now ranks as the world’s third-largest company by market value, and may surpass ExxonMobil to become the largest publicly traded company by 2014.

One interesting piece of information in the article is related to the domestic price of natural gas for Russian consumers:

Gazprom’s ties to the government are already paying dividends in the domestic market. Under a policy championed by Mr. Medvedev when he served as deputy prime minister, Russian consumers are going to have to pay starkly higher prices for natural gas. Prices are set to rise about 25 percent a year, starting this year, with the goal of reaching parity with world energy prices by 2011. Policies like this mean that average Russians won’t continue enjoying their traditional access to cheap energy, and they offer a stark example of the government’s willingness to give Gazprom a leg up — regardless of the social fallout.

This policy has implications for many industrial sectors, but particularly carbon black, where producers will be paying more for natural gas.

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