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Gazprom, Once Mighty, Is Reeling

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posted on Dec, 31 2008 @ 01:35 PM
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Gazprom, Once Mighty, Is Reeling


www.nytimes.com

MOSCOW — A year ago, Gazprom, the Russian natural gas monopoly, aspired to be the largest corporation in the world.

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 Gazproms big private sector competitors in the West is looking for one
(visit the link for the full news article)



posted on Dec, 31 2008 @ 01:35 PM
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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.

As a result, by the time the downturn came, they entered the credit crisis deeply in debt and with a backlog of capital investment needs. (Under Mr. Putin, now the prime minister, Gazprom and Rosneft are so tightly controlled by the Kremlin that the companies are not run by mere government appointees, but directly by government ministers who sit on their boards.)


The Russian economy is in great trouble at the moment. The Russian stock exchange has lost approximately 70% of its original value since last September. The Ruble has hit an all-time low value against the Euro and Russians are afraid of another economic collapse similar to the collapse of the Soviet Union. For that reason, many reason are currently spending all their savings on luxury products such as tvs, fridges, etc.

The reason being the financial crisis originating from the US as well as the low oil price. Russia is mainly dependent on income from oil and gas exports. Often they have threatened to cut off the gas supply to Europe but never will do so for a long time since they lack the infrastructure to export such volumes anywhere else.


I for one am happy that Gazprom's position is currently being destabilized since they are becoming way too dominant.



www.nytimes.com
(visit the link for the full news article)



posted on Dec, 31 2008 @ 01:37 PM
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