Russia's Once Mighty Oil Giant Gazprom Buried In Debt, Seeking Government Bailout

New York Times:

A year ago, Gazprom, the Russian natural gas monopoly, aspired to be the largest corporation in the world. Buoyed by high oil prices and political backing from the Kremlin, it had already achieved third place judging by market capitalization, behind Exxon Mobil and General Electric.

Today, Gazprom is deep in debt and negotiating a government bailout. Its market cap, the total value of all the company's shares, has fallen 76 percent since the beginning of the year. Instead of becoming the world's largest company, it has tumbled to 35th place. And while bailouts are increasingly common, none of Gazprom's big private sector competitors in the West is looking for one.

Read the whole story: New York Times

Comments

[randeg]

This is a most welcome news for me because I am concerned as to what they're going to do once they have control over oil supply. I can't imagine the capital falling down 64%. No wonder they wanted to buy Spain's oil company but the Citigroup beat them to it.

Evelyn Guzman
http://www.debtchallenges.com (If you want to visit, just click but if it doesn’t work, copy and paste it onto your browser.)

[Big0725]

And people think that the US economy is in shambles, look no further than Russia. Without high oil prices they're nothing. Except armed with nuclear weapons!

[JPHR]

The article is inconsistent. On the one hand complaining about debt and on the other hand about not investing. As if investment would have helped Gazprom now. Producing more is definitely not the answer for Russia. You may complain about re-nationalizing, but why give away natural resources to corporations? The excessive influence of corporations on government seems unique to the US. Are you really happy with the recent results?
Even CNBC acknowledges that the spike in in the oil price was fueled by the unregulated financial industry.
Gazprom reeling by debt? Thanks to the US credit crises refinancing debt has become very difficult indeed. But that has nothing to do with Russia or Gazprom but much more with an irresponsible fumbling US Government letting Lehman fail and so causing the credit seizure.
But Russia had invested most of its reserves outside Russia and will now simply return that money and use it for refinancing that debt. The current PE ratio is about 4 to 5 at the RTS and Micex so the Russian government will most probably do an extremely good deal. One year or perhaps somewhat longer down the road the oil price will have returned to somewhere around 65 to 80. Yeah Russia goes trough a rough patch now but not with a triple deficit and excessive national debt. Think about it the US is triple AAA and Russia has been downgraded recently by those same agencies who AAA rated all those mortgage debts.

[planetjeffy]

Putin won't be sailing sailing into Cuba, once his oil companies completely collapse. Russia will make Iceland look like a success story. I feel sorry for the Russian people, but they will learn a harsh lesson here.

[adamsmith3]

LOL....that's what you get for trying to build your economy on your natural resources rather than an ideas and services economy. You're at the whims of the commodities market. Wonder if they'll take a page from comrade Bush and start bailing out and nationalizing. Oh well.....so what about that Russian prof predicting that the US would split into four or five different territories after civil war? Looks like the entire industrialized world is going to take a hard hit, especially China.

[tomas0808]

I don't get it. They were the third largest and now they are thirty-fifth. I assume they are selling just as much gas as before and employ the same number of people so why the drop? There should be a more realism based way of judging a company, not based on making up numbers or what they might sell ten years from now if everything goes their way

[JPHR]

You spotted the anomaly. Market capitalization: during a crises with an extreme herd stampede to the exit prices on that small market (www.rts.ru check the English section) were driven down. Within a few months some 200 billion US$ was withdrawn from Russia. Please note that Russia GDP is slightly more than 1/10 of the US. The White House intentionally misleading the US public on Georgia was only a small part of that. Forced de-leveraging both by parties outside Russia (hedge funds, investment banks?) and some olicharchs too drove down "market prices" to clear irrational levels and PE ratios of around 4.Clearly those parties sold anything they could still sell. Russia has not sufficient internal demand for equity to compensate for that.
Also note that in terms of proven reserves Russia's oil and gas companies are probably be much better positioned. By the way Russia did tax away most of the oil price hike and is now reducing that tax too. So Gazprom, Lukoil or TNK-BP are much less affected by the reversal of the oil price than the 147 to 40 US$ trajectory might suggest.

[vjoseph]

LOL, this what you get for cheering to quickly on US demise

[TJCole]

When you run a gangster style economy as Putin and Russia has chosen to, you must reinvest in the corporation and it's infrastructure not just take out profits while it is still in it's infancy as Gasprom or Putin apparently did and is now in trouble..

Maybe if Putin held off on buying those 70 new nuclear weapons, or warheads he can bail out Gasprom..?

[Indubio]

You hit the nail on the head and it isn;t just with Gazprom; it's what has happened with just about every Russian corporation, which is why Russia still has abysmal infrastructuyre, no domestic market, and a government that isn't likely to survive 2009. Putin and his oligarchic gang of thugs used Russia's natural resources as their personal money tree, which is why the article yesterday by some Russian computer geek suggesting the US would break apart and Alaska would revert back to Russian rule was so comical. The US has very serious fiscal issues but our problems pale in comparison to Russia's (or China).

[JustAHumanOnEarth]

Perhaps the US civil war and resulting break up will start when our government starts giving Russian companies free bailouts? Could be part of the Russian's master plan for global domination!

Russia, China, the US....we're all in the same fiscal boat.

[TJCole]

Thanks Indubio; you know the issue and did you ever read or hear of the "Piratization of Russia.." a great resource on this topic and very specific as to the oligarch system there...I feel for the Russia people who have so much in common with us and yet have suffered so greatly in this past century...

[vjoseph]

Yep, that guy should have looked into his own backyard before making dumb predictions