Part of Putin's Games, a series that examines what the Sochi Winter Olympics reveal about Vladimir Putin’s Russia.
The view from the south bank of the Neva River is St. Petersburg’s skyline as it has looked for centuries: cold waters – frozen in January – stretching into a row of low-rise, pastel-coloured buildings. The scene is topped by the graceful golden spire of the Peter and Paul Cathedral.
The horizon recalls the ambitions of Peter The Great, the czar who made this European-looking city his new capital, showcasing the modernized, westward-facing Russia he sought to build.
Three hundred years later, another Russian strongman is about to add his own spire, and message, to that skyline: a 465-metre tower that will serve as the new headquarters of OAO Gazprom, an arm of the state-owned giant that Russian President Vladimir Putin has nurtured into one of the biggest energy companies in the world, as well as an active tool of Kremlin power.
“This centre is a symbol of prestige for the President. You can find analogous buildings in Dubai and Pyongyang,” said Dmitry Litvinov, co-ordinator of a citizens’ group that opposes the project. The activists scored an unexpected victory last year when they forced Gazprom to move the tower to the outskirts of the city from its proposed location right in the historic heart of St. Petersburg.
Nonetheless, the 86-floor Lakhta Center – shaped like a gas flare – will become the tallest building in Europe when construction is finished in 2017. Mr. Putin might see that as fitting given that the European Union is reliant on Gazprom for roughly a quarter of all natural gas it consumes. Eastern Europe is even more dependent, with Ukraine, Belarus, Bulgaria, Finland and much of the former Yugoslavia receiving upwards of 90 per cent of their gas from Gazprom.
That reliance has become a concern for governments from Brussels to Kiev. One of Mr. Putin’s first acts upon becoming President in 2000 was to force out directors he believed were mismanaging Gazprom (the company was briefly privatized in the 1990s) and to put the company under the direction of a trusted ally, Dmitry Medvedev, now Mr. Putin’s Prime Minister. Within five years, the Kremlin was again Gazprom’s majority owner, as it was before the fall of the Soviet Union.
Today’s director, Alexei Miller, is another close Putin associate, dating back to the 1990s when he worked for Mr. Putin in the St. Petersburg government. “Putin doesn’t need to control Gazprom [day-to-day] because he’s got his man at the head of the company. Alexei Miller, in practice, is Putin’s Minister of Oil and Gas. And Gazprom, under Miller, is the government’s Ministry of Oil and Gas, just like it was in Soviet times,” said Dmitry Travin, a professor of economics at the European University in St. Petersburg.
The Kremlin has never been shy about using the clout it inherited from supplying much of Europe’s energy. Throughout Mr. Putin’s 15 years in power, Russia – via Gazprom – has used its ability to unilaterally hike or decrease the cost of energy to influence elections and political crises in neighbouring country’s such as Ukraine, Belarus and Georgia, drawing angry accusations of economic blackmail.
In December, Gazprom raised eyebrows when it slashed, by a third, the price it charges Ukraine for gas, in a move that looked like a reward to President Viktor Yanukovych after he rejected a trade deal with the European Union in favour of closer ties with the Kremlin. The new pricing arrangement was announced not by Mr. Miller, but by Mr. Putin.
But critics also see a weakness in Moscow’s heavy reliance on Gazprom. Energy sales account for two-thirds of all Russian exports, meaning a sudden drop in the price of oil could have calamitous consequences for the country.
Prof. Travin says there has long been a direct link between resources prices and the popularity of Russian leaders. Low oil prices, in the $20 to $30 a barrel range, contributed in the 1980s to the spread of popular dissent ahead of the Soviet Union’s collapse. Similar prices hampered Boris Yeltsin’s efforts to manage the country’s transition from communism to capitalism.
Mr. Putin, meanwhile, has been gifted with oil prices that rose to $80 from $40 a barrel during his first stint in the presidency, contributing to steady growth both in the overall economy and in real incomes. Today’s price – at nearly $100 a barrel – helps mask that much of Russia’s non-resource economy is stagnating. “If oil prices fell, Russia would go into recession,” Prof. Travin says.
Though the designers of Gazprom’s new headquarters don’t like the comparison, the chosen design for their glass-and-steel tower does indeed recall the boastful skyline of Dubai, another petro-fuelled economy. “The design is very unusual, not just for St. Petersburg, but for Russia,” acknowledges Sergei Nikiforov, the Lakhta Center’s chief engineer.
Mr. Nikiforov won’t say how far up the Kremlin power pyramid architects had to go to get approval for the design, but it seems improbable that Mr. Putin – a St. Petersburg native – wouldn’t have had the final nod.
“We live in an authoritarian regime,” shrugs Mr. Litvinov. He says Mr. Putin backed down on the plans to build Gazprom’s new headquarters in downtown St. Petersburg only when UNESCO warned that it might cost the city its status as a World Heritage Site.
“Putin came to understand that the Lakhta Center had to be moved to preserve the whole idea of it,” Mr. Litvinov said. “There is no economic value to this project, it’s just about the image and the prestige of the President.”
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