FT Energy Source Things are different now for Gazprom, and its investors

By Courtney Weaver in Moscow

Tit-for-tat between Russia and its former Soviet neighbours is hardly a new development, especially when it comes to gas. But the latest conflict, with Belarus, looks to be different than previously ones mainly because of the change in Gazprom’s commercial position.

Since the two-week gas stand-off between it and Naftogaz, its Ukrainian customer, in January 2009, the Russian gas monopoly has lost its commercial grip on Europe as consumption fell across the continent due to the recession, while the US shale gas boom has raised questions about the longer term.

Investors are also becoming wary of Gazprom’s politics, analysts say.

Explains Lilit Gevorgyan, a political analyst at IHS Global Insight:

Gazprom is a state-owned company and unlike other commercial enterprises it has deals that have political connotations.

While the dispute between Gazprom and Belarus is “relatively minor”, says Chris Weafer, chief strategist at Uralsib, “it is another one of those issues that remind investors about [the company's] political risks”.

Weafer adds:

Investors are taking a massive bet against Gazprom… and the main reason is because they have taken the view that there is a very high Kremlin risk in this stock.

Investors have been selling out of Gazprom very aggressively over the past two years. While at the end of 2008 Gazprom stock represented 34.33 per cent of the average Russia-focused portfolio, a year later it only represented 17.3 per cent and this past April only 15.3 per cent, according to EPFR Global.

This compares with the 28.8 per cent weighting that the MSCI Russia Index gives Gazprom.

While Gazprom spokesman Sergei Kupriyanov signalled on a conference call with reporters on Tuesday that he expected the dispute to be over within a matter of days or even hours, the other problems facing the company are unlikely to go away quickly.

“Gazprom is in a precarious situation [financially] after making pricing concessions to Ukraine and some European importers ,” says Valery Nesterov, an analyst at Troika Dialog.

“It’s a very unfortunate situation.”

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