Ownership Of Gazprom Questioned; Shares Fall (Published 2004) (2024)

A Russian lawmaker has demanded an investigation into whether foreigners illegally bought Gazprom shares that only Russians may own, sending the stock down 13 percent.

On Wednesday, the lawmaker, Yuri Savelyev, a radical member of Russia's Rodina Party, sent a letter to various Russian agencies -- among them the Interior Ministry, the Federal Security Service (formerly the K.G.B.) and the general prosecutor's office -- urging them to look into foreign ownership of local Gazprom shares.

Since the 1990's, the government has maintained a two-tier system for investing in Gazprom; by law, only Russian residents can buy domestic shares in Gazprom, while foreigners are only allowed to own American depository receipts, which are less liquid and occasionally more expensive.

Though the local Gazprom shares fell sharply on news of Mr. Savelyev's request, the A.D.R.'s moved down 0.7 percent.

The dual system is controversial in Russia, and Economy Minister German Gref said in April that the country would end the ''ring-fence,'' as the restrictions are called, sometime this year.

The two-tier system has given way to ''gray schemes'' that are not only tolerated by Gazprom, but practically encouraged. Ruhrgas, the German natural gas giant, for instance, owns roughly 6 percent of Gazprom, 1.5 percent in A.D.R.'s and 4.5 percent through a gray scheme set up in partnership with Gazprom itself.

A Gazprom spokeswoman, Olga Moreva, declined comment on the accusations but referred questions to the United Financial Group, a leading Russian investment bank, without explanation.

Gray schemes are mostly set up by Russian-registered brokerages to buy Gazprom domestic shares on behalf of foreign clients. Gray-scheme funds get around foreign-ownership restrictions by selling stock in shell companies whose only assets are Gazprom local shares.

Mr. Savelyev, deputy chairman of the lower house industry committee, specifically focused on the United Financial Group.

''I fear that a controlling stake of Gazprom will end up in the hands of foreigners, and that we will lose Gazprom,'' he told news agencies, adding that United Financial had set up gray schemes to sell Gazprom local shares. He named no other firms, though brokerages typically offer gray-scheme funds.

United Financial Group executives responded on Wednesday by saying the accusations of illegality could be part of a campaign by a Russian businessman, Pavel M. Svirsky, to pressure United Financial to sell him some contested Gazprom shares.

Mr. Svirsky is suing the United Financial Group and some other brokerage firms in a regional court in Rostov, contending that he is the owner of Gazprom shares once held by a Creditanstalt shell company that declared bankruptcy. In 1999, those shares, worth roughly $50 million, were stolen and sold on the open market by a Creditanstalt employee. United Financial says it unknowingly bought some of the shares, but that regulators ruled the same year that United Financial was not at fault and was the rightful owner of all the stock.

''Four years ago the debate was all about the legality of gray schemes, but everyone has moved on,'' said Charles E. Ryan, chairman and chief executive of the United Financial Group, which is 40 percent owned by Deutsche Bank. ''Now the debate has shifted to how the Russian government raises its stake to 51 percent in Gazprom, and then, when do they bring down the ring-fence.''

The government owns 38 percent of Gazprom, and has been reluctant to get rid of the two-tier system until it holds a majority stake.

Mr. Svirsky denied that he was the impetus for the investigation request. ''They will use me, to scare everyone,'' he told Interfax news agency. ''A great deal of things has been attributed to us which we have nothing to do with.''

Analysts estimate that foreign investors own roughly 20 percent of Gazprom, 16 percent to 17 percent through gray schemes and 3 percent through A.D.R.'s.

Investors were already jittery that the government attack on Yukos, Russia's largest oil company, might spread to other blue-chip companies over which the government wants to exert more control. ''Until this case is settled, the uncertainty it creates will result in a highly volatile Gazprom share market and continued doubts about Russia's investment environment,'' Ilya Sherbovich, president of United Financial, said in a statement.

Gray schemes involving Gazprom shares are legal. But the loopholes that allow them to exist are proving an awkward reality for the Russian government, which wants to attract foreign investors in Gazprom, while maintaining the pretense of restricting foreigners to only one type of share until the Kremlin chooses to get rid of the two-tier share system.

''This risk has been embedded in the Russian market since the end of 1996, when Gazprom was first brought to foreign equity markets,'' Paul Collison, an analyst at Brunswick UBS, warned in a note to clients on Wednesday. ''So-called Gazprom gray-scheme investment structures could be targeted by government for violating the spirit, if not the actual letter, of Russian law.''