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Russia: Gas float that’s not for foreigners

Itera began life as little more than a bill collector for Gazprom, Russia's state-owned gas monopoly. Many think its real purpose was simply to siphon cash out of Gazprom and into management's pockets. Now Itera plans to float on the German stock exchange. Will investors be tempted? Probably not, but that is not the point of the IPO.

Registered in Florida (and re-registered in the Dutch Antilles), Itera was set up to collect Ukraine's gas bill. Ukraine is almost entirely dependent on Russia for power, but ran up $1.4 billion in unpaid debt. Every time Gazprom tried to cut it off then-president Boris Yeltsin would trade political favours for resumed gas deliveries. Later Itera played a similar role in brokering gas payments between Ukraine and Turkmenistan.

But Itera quickly expanded its operations and is now the second-biggest gas producer in Russia. Thanks to Gazprom's dominance, it is hard to break into the business. Surgutneftegas has been trying to develop its gas assets for most of the past 10 years and produces about 10 billion cubic metres (bcm) a year. After less than five years in business Itera produced 20bcm last year.

Itera's rapid rise has led to assumptions that Gazprom's management is behind the company - accusations that have never been proved.

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