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26 Jun, 2007 21:42

A step too far for Gazprom?

Russia's gas export monopoly is expanding to the West and the East, but it's plans on the domestic market may pose risks for growth.

Gazprom's influence and ambitions to stretch the length and breadth of Russia and deep into Europe and Asia. Despite the company's expansion plans abroad, its push to expand outside its core business could hold it back.
At the same time the state-controlled company says all its activities are driven by commerce – not politics.

“Not everyone has paid attention to this, but I must say that every project we do is bound to the market. We are guided by the market, both in Russia and abroad,” pinpointed Aleksandr Medvedev, the Deputy CEO of Gazprom.

Being the largest natural gas producer in the world Gazprom says its gas export revenues will reach a record high this year as demand for gas is increasing both in the West and the East.

But although it may seem like nothing can stand in the way of Gazprom's growth, even the mighty have flaws.

The company is not stopping with energy by making it clear that it plans to increase its participation in sectors as varied as utilities, infrastructure, and mass media.

“The company is trying to participate in all possible segments of the Russian economy – which I believe could disperse the company resources. I do not believe this creates value for share-holders,” noted oil and gas analyst Dmitry Lugashov.
The return on investment in Russian gas leaves most of the country's other sectors trailing behind.
So the diversification strategy poses risks not only for Gazprom's shareholders but also for the company's stated mission to make its decisions on commercial considerations alone.