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Is the world big enough for Gazprom?

The imminent liberalization of Gazprom share ownership rules will introduce the world's biggest energy company to the world's biggest investors. But is Gazprom ready for the world, or the world for Gazprom?

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IN THE NEXT three months, the Russian government will finally liberalize Gazprom's share structure, allowing foreign investors unfettered access to the equity of Russia's biggest company. It is a watershed event for Russian equities. "It's the best thing to happen to the Russian stockmarket since president Putin was elected," says Vadim Kleiner, head of research at Russian hedge fund Hermitage Capital.

Up to now, foreign investors have had severely restricted access to Gazprom equity. The previous management of the gas concern, perhaps to protect their own control of the company, put in place a law limiting foreign investors' Gazprom holdings to American depositary receipts. Only investors registered in Russia could buy the company's Moscow-listed stock.

This restricted foreign access to about 3% of the company. However, foreign investors were able to buy the local shares through so-called grey trading schemes, using brokerages in Moscow to set up special investment vehicles.

Such schemes enjoyed quite a lot of credibility – Germany's Ruhrgas, for example, has a stake in Gazprom that it acquired through such a vehicle. But the risk of an attack by Russian bureaucrats on grey trading schemes was sufficient to put off some of the larger, more conservative institutional investors.

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