Gazprom gets Putin ally as chief

Alexei Miller, replacement Gazprom chief

MOSCOW, Russia (CNN) -- Russian President Vladimir Putin has put a close ally in command of the world's largest natural gas company, Gazprom.

The board of Gazprom, a leviathan with tight Kremlin ties that supplies about a quarter of the European Union's gas needs, voted unanimously to replace Rem Vyakhirev with Deputy Energy Minister Alexei Miller.

Miller, 39, and Putin were close associates in the St. Petersburg city government from 1991 to 1996.

He was named deputy energy minister by the Russian president last year.

The reshuffle at the top ranks of Gazprom, in which the government holds a 38 percent stake, marks an attempt by Putin to exert more control over a sprawling company that has propped up Russian's teetering industry with cheap subsidised gas while serving as a major export earner.

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The move is being seen as a further effort by Putin to consolidate control over a Russian economy in which a handful of giant monopolies still exercise enormous influence.

Since his election in March 2000, Putin has placed friends and officials from his old St. Petersburg circle in key positions.

He has also reinforced the role of the Federal Security Service, the successor to the KGB, Putin's former employer, in public life -- including giving it more prominence in the effort to stamp out the remnants of a rebel insurgency in the breakaway region of Chechnya.

A Gazprom spokesman said the company's chairman, Dmitry Medvedev, who also serves as Putin's deputy chief of staff, had proposed that Vyakhirev's contract, which expires Thursday, not be extended.

Not 'just a gas company'

Vyakhirev, 66, was among the 11 Gazprom board members who voted to approve Miller's appointment, the spokesman said.

"Gazprom is more than just a gas company," Putin said in a meeting at the Kremlin with Prime Minister Mikhail Kasyanov, Vyakhirev and Miller, in remarks carried by Associated Press.

"It provides a quarter of all budget revenues, and the entire national economy depends on the gas and energy industry."

Gazprom, with some $40 billion of fossil fuel reserves, pulled in $17 billion in total sales last year. But based on its stock value, the company, created as a joint-stock company by a presidential decree from Boris Yeltsin in 1993, is worth about $8 billion.

Gas production and transmission account for about 95 percent of Gazprom's total revenues. Within Russia, Gazprom controls all the country's domestic pipelines and 94 percent of production, making the company a utility juggernaut second to none.

Yet the company's massive size -- it has 360,000 employees -- belies its image among many western investors as a shoddily managed Soviet-era holdover, beset by a lack of financial transparency and riddled with cronyism and backroom dealing.

Much was made in the West of the fact that a former Russian prime minister, Viktor Chernomyrdin, who served under Boris Yeltsin from 1992 to 1998, was a former head of Gazprom.

Vyakhirev's daughter and the children of other high-level managers, for instance, own portions of the pipeline construction company Stroitransgas, on which Gazprom has lavished billions of dollars worth of contracts, according to The Wall Street Journal.

The newspaper cited a senior Kremlin official as saying the state was aware valuable assets had been shifted out of the natural gas monopoly. The official said the government was probing allegations of wrongdoing.

The latest development at Gazprom comes less than a month after the company seized control of Russia's largest independent television station, NTV, in what was described as a boardroom coup.

Critics decried the gambit as a cynical attempt by the Russian government to stifle a news outlet whose coverage had often been sharply critical of the Kremlin -- even though the station under media tycoon Vladimir Gusinsky had enthusiastically backed the 1996 re-election campaign of Boris Yeltsin.

The Kremlin countered that the NTV move was made purely for commercial reasons, in a bid to revive the flagging balance sheet of the station.

The International Monetary Fund, one of the world's leading lenders, has pressed for more financial transparency at Gazprom.

Miller, in remarks to reporters after his meeting with Putin, carried by Associated Press, pledged to boost the company's stock price, increase transparency and raise output by 10 to 15 percent by 2010.

But he brushed aside IMF demands to break up the company, insisting the company's decision-making methods were "very well centralised" and should be left in place.