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Gazprom, the state company that controls almost 90% of Russian gas production, is similarly tied in to the Kremlin. Its chair of the board is Dmitri Medvedev, the First Deputy Prime Minister, who is widely seen as a possible Putin heir. After its brush with Ukraine, Gazprom is now pushing hard to acquire gas distribution and marketing companies in other countries; last week it acquired the industrial and commercial client base of Britain's privately-owned Pennine Natural Gas. The next sector ripe for state consolidation may be the pipeline business.
According to official documents seen by Time, there are moves afoot within the Kremlin to create a huge oil and gas pipe-line monopoly based on an existing pipeline operator, Transneft. In February, Russian Industry and Energy Minister Viktor Khristenko submitted a report to Putin suggesting that Transneft acquire Russia's stake in the Caspian Pipeline Consortium (CPC), a company partly owned by the governments of Kazakhstan and Oman, which operates a 1,500-km oil pipeline from western Kazakhstan to a marine terminal in the Russian Black Sea port of Novorossiysk. Putin endorsed the idea. The transfer of ownership is likely to enrage the CPC's other owners, who view Transneft as a competitor. People familiar with the consortium's internal discussions say that the Russians have not yet officially proposed an ownership transfer. CPC executives couldn't be reached for comment. A spokesman for Chevron, which has the biggest private-sector involvement in the consortium, declined to comment and a spokesman for Mobil, which also has a stake, said the firm "does not speculate on rumors."
Fretting
Being so political isn't always a boon. Russia, for example, subsidizes some Rosneft oil shipments from its Vankor fields by rail to China, even though it could sell the same oil to Europe without the subsidies, which are needed to bring down the high transportation costs. In that case, the desire to improve political ties with China outweighs commercial considerations. Yet by contrast, Vladimir Ryzhkov, an independent member of the Duma, reckons that the key driver of the Ukraine conflict earlier this year was Gazprom wanting better prices — "not some willingness to revive the [Russian] empire or punish [Ukrainian President Viktor] Yushchenko." A former Russian Deputy Energy Minister, Vladimir Milov, reports that top officials from Putin down spend a lot of their time fretting about corporate matters. "I was surprised to realize that the lion's share of our President's office work was detailed involvement in the daily life of our gas sector," Milov wrote in a Russian biweekly, Novaya Gazeta. "I felt that Putin personally handled a great deal of what Gazprom's ceo was supposed to do."
Such confusion of roles finds its echo in Europe's approach to Russia. A green paper published by the European Commission in March called for a common external energy policy to coordinate relations with Russia and opec, but that quickly ran into objections from E.U. governments which want to make energy policy themselves. Poland, for example, is extremely nervous about Putin's Russia, partly due to historical fear of its giant neighbor to the east, and partly because it worries about losing out if Russia and Germany work closely together. Germany, meanwhile, which is Russia's biggest West European customer, seems to be pushing toward greater reliance on Russian sources. Former Chancellor Gerhard Schröder has taken a job as head of the supervisory board of a joint venture between Gazprom and two German firms that is building an underwater gas pipeline linking Russia and Germany. Roland Götz, head of the Russia department at the German Institute for International and Security Affairs in Berlin, says German dependence on Russian energy supplies will increase, in part because of a growing belief that Russia "is the best alternative to the Middle East. If something happens in Saudi Arabia we are powerless. But Russia is cooperative in many cases. Europe has considerable influence on Russia."
Ambiguity
To an extent, there's some hypocrisy in Western fears about Russia's energy sector. Jonathan Stern of the Oxford Institute for Energy Studies notes, for example, that the national energy companies in France and Italy are also majority state owned, and their chief executives are picked by the government. And regardless of any reluctance, many European countries have signed gas contracts with the Russians that cover them until about 2015. It's what happens thereafter that is unclear. European energy demand is expected to continue to rise apace, while Russia, for its part, needs Western capital if it is to continue raising its oil and gas production levels — the iea anticipates investments of more than $300 billion between today and 2030 for gas alone. Certainly, Western business remains upbeat about Russia. Britain's BP has invested about $8 billion in a joint venture in Russia; John Browne, BP's chief executive, says that Russia "has become in the last five years one of the more secure suppliers to Europe and the rest of the world."
Browder hasn't given up on Russia, either, even though he's not allowed back into the country. He lists Gazprom as one of the companies he has successfully pressured into improving its management practices. So far the Russians haven't reacted to the public fuss he has been kicking up; he now hopes that his case will be brought up at the G-8 meeting. "I'm the poster child of Russian ambiguity," he says. But a country that jails or denies visas to some of its most successful tycoons is bound to be seen as unreliable. No amount of sweet-talking by Rosneft's president — or Putin — can mask that.