In a stunning Kremlin-orchestrated boardroom coup, the head of the world's biggest natural gas producer has been deposed from his post, clearing the way for President Vladimir Putin to win control of Russia's most valuable asset.
Rem Vyakhirev, who had run the gigantic OAO Gazprom gas monopoly with an iron fist for nearly a decade, was dumped from his job at a board meeting yesterday. He was replaced as chief executive officer by 39-year-old Alexei Miller, a deputy energy minister and close ally of Mr. Putin.
The move has huge significance for economic reform in Russia. It is expected to trigger an overhaul of Gazprom's murky insider dealings, opening up the monopoly to competition and allowing a cleanup of the corruption that has plagued the company for years.
The company's shares rose 2.48 per cent on the Moscow stock exchange after the news of Mr. Vyakhirev's ouster.
The shakeup could also have broad implications for Western consumers and for geopolitical strategic issues.
Gazprom controls 23 per cent of the world's natural gas reserves and provides one-third of Europe's gas supply.
Moreover, by providing cheap energy to former Soviet republics that are heavily indebted to it, Gazprom has helped give Moscow tremendous political influence over its neighbours.
But the biggest impact of the Gazprom shakeup will be in Russia, where Mr. Putin needed to prove that he is serious about economic reform. If he failed to clean up Gazprom and tackle its monopoly control over the distribution and export of Russian gas, Mr. Putin would be in danger of losing credibility in his larger reform agenda. He has vowed to restructure Russia's natural monopolies, including Gazprom.
Gazprom is the single most important company in Russia. It accounts for 8 per cent of the Russian economy and one-fifth of federal tax revenue. It employs 300,000 people and is expected to reap $21-billion (U.S.) in sales this year.
In the past, while the Russian government has held nominal control of Gazprom with a 38-per-cent ownership stake, the company had often defied the Kremlin, operating arrogantly in the interests of its own senior managers for most of the 1990s.
Its former chairman, Viktor Chernomyrdin, served as Russian prime minister for five years in the 1990s under then president Boris Yeltsin, ensuring that Gazprom would be shielded from reform.
Mr. Vyakhirev, a powerful 66-year-old boss in the classic mould of a Soviet-trained "red director," has recently been the subject of rumours that he might be finally forced to leave. But until yesterday, most analysts thought he would survive in his post for another six months or a year.
In a face-saving gesture, Mr. Vyakhirev was reportedly offered the job of chairman, which at Gazprom is a less powerful position than CEO.
The Kremlin has been gradually tightening its grip on Gazprom. It controls five of the 11 positions on the board. Another seat on the board is held by the German company Ruhrgas AG, and another post is held by former finance minister Boris Fyodorov, who represents minority shareholders. The remaining four places are controlled by management.
Mr. Fyodorov has campaigned tirelessly for a sweeping overhaul of Gazprom's management to get rid of corrupt insider deals. He has estimated that Gazprom is losing up to $3-billion annually as a result of asset-stripping and other improper practices. Senior Kremlin officials have recently echoed these allegations.
In one of the most blatant examples of Gazprom's controversial practises, an unknown company called Itera has emerged from nowhere to gain control of some of Gazprom's most valuable assets. Its owners are widely suspected of having close links to Gazprom executives. Despite the mystery surrounding its sudden rise, Itera is now ranked as one of the world's biggest holders of gas reserves.
After the management shakeup was announced yesterday, Mr. Putin made it clear that he expects big changes in Gazprom's operations. He warned that the gas industry would end up "in a dead end" if its management remained the same. "Changes must be outlined and the situation altered," he told a Russian news agency yesterday.
The key question is whether the new CEO, Mr. Miller, has enough clout to defeat the company's Soviet-era managers, who will certainly resist any reforms that jeopardize their autonomy and wealth.
Mr. Miller is an economist who served with Mr. Putin in the foreign relations department of the mayor's office in St. Petersburg in the early 1990s. He became the deputy energy minister last year after Mr. Putin's election victory. He is seen as an ally of the liberal reform wing of Mr. Putin's cabinet.
Gazprom is a major player in Russia's domestic political intrigues. By paying or withholding taxes, it can support or undermine any Russian government. By providing cheap gas to Russian industry and households, it wields major influence in most regions of the country.
Geoffrey York