(Bloomberg) -- Perhaps no organization outlines the strengths and weaknesses of Vladimir Putin’s Russia better than Gazprom PJSC, the giant energy exporter that emerged from the Soviet Union’s gas ministry.
The company employs over 400,000, holds the world’s biggest gas reserves and generated more than a $1 trillion in revenue in the past decade. Yet, over the same period its stock-market value crashed more than 80 percent in dollar terms as the state-run company was wrong-footed by the rise of shale gas in the U.S., economic stagnation in its largest European customers and the crash in oil prices.
In an interview, Putin said he was unconcerned by the company’s share price and argued for the durability of Gazprom as a state-run enterprise and its central role in Russian life.
“Gazprom is clearly undervalued -- this is an absolutely obvious fact,” he said in Vladivostok last week. “We have no plans to sell it yet, and this is because of the peculiarities of the Russian economy, the social sphere and the Russian energy industry.”
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Putin is also loyal to Gazprom’s leadership. Chief Executive Officer Alexey Miller, an associate of the president from his time in the St. Petersburg mayor’s office, has been in office for more than 15 years and was recently appointed for another five-year term.
In 2008, Miller said Gazprom could become the world’s first trillion-dollar company. Since then, its market capitalization has fallen from more than $300 billion to less than $50 billion. Once Russia’s largest company by market value, it was surpassed this year, first by Russia’s largest crude producer Rosneft PJSC and later by the largest bank, Sberbank PJSC.
Asked to compare Miller to a general who’d lost 80 percent of his army, Putin said the comparison didn’t stand up.
“Listen, that’s a different story,” he said. “If we were talking about a general, then the general in this case would have lost nothing, he’s sent it into reserves, which can be called back at any moment and put to use.”
Sixteen years after Putin first assumed the presidency, Gazprom stands as an example of his conservative approach to economic reform even as Russia remains mired in the longest recession in two decades.
Gazprom maintains its monopoly on pipeline exports of gas despite the lobbying of rivals including state-run Rosneft, headed by Putin’s long-time ally Igor Sechin, and Novatek OSJC, co-owned by another associate Gennady Timchenko.
Putin has kept faith because he knows that Miller is completely loyal to him, said Vladimir Milov, an opposition figure who was deputy energy minister in 2002.
“In fact, Putin is the acting CEO of Gazprom," while Miller acts as his representative in everyday business, he said.
In last week’s interview, Putin expressed optimism about Gazprom’s future. Sales are increasing to European customers as the region’s domestic production declines, the company’s building its first pipeline to China, and the outlook for global gas demand is strong, he said.
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Copyright 2016 Bloomberg News.
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