Existing Gazprom Debts Twice as High as 2003 Borrowing Plans, Moscow Daily Says
CEP20021219000108 Moscow Komsomolskaya Pravda in Russian 19 Dec 02 P 4
Russia: Gazprom Document Suggests Bankruptcy 'Approaching Inexorably' CEP20021217000273 Moscow Nezavisimaya Gazeta Russian 17 Dec 02
[Report by Anton Nefedov under the "Scandal" rubric: "Whither Gazprom? Country's Biggest Monopoly Owes Twice as Much as It Can Repay"]
[FBIS Translated Text]
There is an accepted wisdom in life that you should live according to your means and not take more than you have earned. Russia learned this lesson after August 1998: It is not taking out new loans and is paying back the old ones on the dot.
But within Russia there is another country -- Gazprom. The gas empire within the country has not declared a default and throughout the 10 years of its credit history has conducted itself in a fashion more exemplary than that of a graduate of an institute for young ladies of noble birth. In other words, it has built up debts right, left, and center. And at the same time it has lived high on the hog without making too much attempt to curb its appetite. Even under the new leadership. And it seems it has now gotten itself into trouble.
It emerges from the gas corporation board's draft resolution "On Borrowings for 2003" and from the Operating Report for 2002 that the "level of Gazprom debt is close to the maximum permissible. And the loans of $3.56 billion that are to be raised in 2003 are not sufficient even to service previous debts for a year."
After all, in the coming year alone Gazprom will have to pay twice that much -- $7.45 billion -- on its existing debts. And in total Russia's largest and most respected monopoly has piled up debts of $14.7 billion. And its creditors have only one option left -- to take the holy of holies in lieu of the debts -- the revenue from the export of Russian gas!
The draft resolution "On Borrowings" says: "Gazprom has borrowed more from the Russian market than the banks can lend according to the norms of the Russian Federation Central Bank." And how! It has borrowed its way into big trouble...
Meanwhile, the Gazprom people are clearly in no mood to tighten their belts. The concern's anticipated revenue in 2003 is R964 billion. But its expenditure is planned to be no less than 1110 billion silver rubles! Furthermore, this figure includes advertising expenditure equivalent to $70 million. Perhaps this has been done so as to deliver a fine report to the Kremlin?
[Description of Source: Moscow Komsomolskaya Pravda in Russian -- One of Russia's largest-circulation and most outspoken dailies, controlled by Vladimir Potanin.]
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CEP20021218000020 Moscow Interfax in English 0748 GMT 18 Dec 02
[FBIS Transcribed Text]
MOSCOW. Dec 18 (Interfax) - The head of the Russian Audit Chamber has dismissed media reports that Gazprom is bankrupt.
"We have looked at Gazprom and found that the situation there is not straightforward, but there are no grounds whatsoever to describe the company as bankrupt," Sergei Stepashin told reporters.
[Description of Source: Moscow Interfax in English -- non-government information agency known for its aggressive reporting, extensive economic coverage, and good coverage of Russia's regions]
Russia: Gazprom Document Suggests Bankruptcy 'Approaching Inexorably'
CEP20021217000273 Moscow Nezavisimaya Gazeta in Russian 17 Dec 02 PP 1, 4
[Report by Andrey Savitskiy: "Gas Bubble. Sensational Document Published on Pages of Nezavisimaya Gazeta: Gazprom's Debts Reach $14.7 Billion and Exceed Russia's Total Annual Debt"]
[FBIS Translated Text]
Nezavisimaya Gazeta has come into possession of a sensational document elaborated deep inside Gazprom and accessible to an extremely restricted circle of people in the concern's leadership. It is a draft resolution of the company's board, entitled "On Approval of the 2003 Borrowing and Securities Flotation Program." According to Nezavisimaya Gazeta's information, the resolution has already been signed by Aleksey Miller in circumstances of the strictest secrecy. It is not for nothing that each page is marked "confidential."
The document indicates unequivocally that the debt noose is tightening around Gazprom's neck. The concern's leaders are making frantic attempts to defer bankruptcy, but judging by the figures it is approaching inexorably.
In 2002 Russia paid about $14 billion on its foreign debts. Gazprom's debt is $14.7 billion. In other words it already exceeds the annual payments of the entire state. This is probably what people have in mind when they say that Gazprom is the world's biggest gas company, with a turnover comparable to that of entire states. But a company with debt of state proportions could simply become a bomb on a state scale.
The concern's debts are growing. According to the document, in 2003 Gazprom will have to pay $7.5 billion. Converting short-term borrowings into long-term borrowings (in other words deferring critical payments until better times) is proving virtually impossible. Furthermore, a significant proportion of Gazprom's export earnings (on which it depends for its existence, because gas sales within Russia are usually at a loss) has to be automatically and unquestioningly given to creditors in repayment of accumulated loans. The document contains a sensational admission: 70 percent of total export earnings, including 97 percent of earnings from contracts with first-class European partners, is tied up under accumulated loans. What then is the point of the biggest state concern's existence if it, in essence, is giving away Russian gas in payment of debts accumulated by the management? It turns out that Gazprom is not just not feeding Russia but is in effect "eating" it. What use is this to anybody?
The government has capped the tariffs for the natural monopolies' services next year. This means that in the domestic market Gazprom will obtain less money that it would like. It also means that Gazprom will be unable to increase gas extraction in order to achieve a corresponding increase in gas exports and export earnings. It has become a vicious circle. The concern's leadership virtually admits that the limits for borrowing in the domestic market have been reached and even exceeded. Borrowing in the external market is growing, and the only source of revenue -- export earnings -- has to be used to secure it. The gas monster's existence is not only losing any economic point for the country but is also planting a bomb under the foundations of the state's economic and political stability.
The phrase "2003 problem" has changed from a frightening one into an ordinary and even untopical one. The idea was that, because of the slipshod debt policy of the previous decade, Russia's debt repayments would peak in 2003 at about $17 billion. A couple of years ago, when economists had just started talking about the "2003 problem," the amount of repayments seemed impossibly high. But economic growth, albeit slight, and above all high oil prices now make it possible to view the national debt problem without fear.
However, the much-used phrase "2003 problem" must now be looked at anew. The state has more or less sorted out its foreign debts, but its "2003 problem" will now be Gazprom's debts, which have reached truly state proportions. The coming year will be full of choices to be made: Will the Kremlin agree to rescue Gazprom by raising tariffs if foreign creditors apply pressure? (In other words, will we all be instructed to pay the Gazprom management's debts?) Will Gazprom be able to build the pyramid further, attracting yet more loans in order to repay the old ones, using Russian gas to provide additional payment?
That way the gas will soon run out.
[Description of Source: Moscow Nezavisimaya Gazeta in Russian -- Daily Moscow newspaper aimed at an elite audience and controlled by Boris Berezovskiy.]