Russian Government Completes Transaction for 50% of Gazprom's Shares

The Russian government has completed the transaction to acquire enough shares of Gazprom to give it 50% plus one share control of the company. It bought 10.74% of Gazprom's shares from Gazprom (treasury shares) for $7.15 billion and completed the transaction at the end of June 2005.

The transaction started out as an effort by the Russian government to create a national oil and gas champion with Gazprom as the vehicle. Rosneft, a state-owned oil company, was to have been merged into Gazprom. Click here to read a review in our archives of how that situation evolved.

Although it may appear that the efforts to merge Rosneft with Gazprom failed, that appearance may be deceiving. The government has put its 10.74% of Gazprom into a new state-owned holding company (Rosneftegaz) along with its 100% holdings in Rosneft. The government has not mentioned whether or not it may also put its other shares of Gazprom into the holding, but we suspect they will. That would make Rosneftegaz a new national oil and gas company that could start to act on its own as a national champion oil and gas company. In this way, the merger will have been done without appearing to have done it. This method would also have the effect of insulating Gazprom from the difficult financial circumstances for Rosneft created by the purchase of Yuganskneftegaz.

This was announced as a completed transaction at the June 24, 2005 General Shareholders Annual Meeting. It was also announced that the completion of this transaction allowed the process to remove the "ring-fence" to move forward. The ring-fence limits the foreign ownership of Gazprom shares. This limitation will be lifted, presumably by the end of 2005.

© 2005 Pan EurAsian Enterprises, Inc.

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Page updated as of July 10, 2005
©Pan EurAsian Enterprises, Inc. 2005