Gazprom is in trouble. The Russian gas monopoly is struggling under the weight of the financial crisis, the drop in the rouble and the collapse of oil and gas prices. Its rating was downgraded last week, it has borrowed record sums and it is struggling to slow the decline of its older fields. The situation is a far cry from last year’s boast by Alexei Miller, the CEO, that the company would become the world’s largest by market capitalisation, surpassing $1,000bn; he also predicted oil prices would top $250 this year. But Gazprom has a big, powerful and moneyed friend in the Kremlin for whom the company is a strategic asset in economic and political terms.
Thus Gazprom is expected not to have to delay buying Eni’s 20 per cent share of Gazprom Neft, its oil unit, for $4.2 bn. Gazprom had been given the right to buy the stake when Eni purchased it in 2007 at an auction of assets formerly belonging to Yukos, the company Vladimir Putin dismantled and largely nationalised. So in fact, the stake was Gazprom’s to lose.
It would have been a jaw dropping moment had the gas giant not been able to muster the financing from Russian banks to buy the stake. For Russia, such a negative surprise was clearly unpalatable: Bloomberg reports an Italian official confirming the sale is going ahead, and Vedomosti, the Russian newspaper, reports that state banks will help finance the deal.
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