Offshore gas intermediary companies in Eurasia

This art icle was downloaded by: [ Universit y of Kent ucky] , [ Charles Dainoff ] On: 19 February 2015, At : 13: 03 Publisher: Rout ledge I nform a Lt d Regist ered in England and Wales Regist ered Num ber: 1072954 Regist ered office: Mort im er House, 37- 41 Mort im er St reet , London W1T 3JH, UK Central Asian Survey Publicat ion det ails, including inst ruct ions f or aut hors and subscript ion inf ormat ion: ht t p: / / www. t andf online. com/ loi/ ccas20 Offshore gas intermediary companies in Eurasia a St acy Closson & Charles Dainof f b a Pat t erson School of Diplomacy and Int ernat ional Commerce, Universit y of Kent ucky, Lexingt on, USA b Depart ment of Polit ical Science, Universit y of Kent ucky, Lexingt on, USA Published online: 17 Feb 2015. Click for updates To cite this article: St acy Closson & Charles Dainof f (2015): Of f shore gas int ermediary companies in Eurasia, Cent ral Asian Survey, DOI: 10. 1080/ 02634937. 2015. 1008795 To link to this article: ht t p: / / dx. doi. org/ 10. 1080/ 02634937. 2015. 1008795 PLEASE SCROLL DOWN FOR ARTI CLE Taylor & Francis m akes every effort t o ensure t he accuracy of all t he inform at ion ( t he “ Cont ent ” ) cont ained in t he publicat ions on our plat form . However, Taylor & Francis, our agent s, and our licensors m ake no represent at ions or warrant ies what soever as t o t he accuracy, com plet eness, or suit abilit y for any purpose of t he Cont ent . Any opinions and views expressed in t his publicat ion are t he opinions and views of t he aut hors, and are not t he views of or endorsed by Taylor & Francis. The accuracy of t he Cont ent should not be relied upon and should be independent ly verified wit h prim ary sources of inform at ion. Taylor and Francis shall not be liable for any losses, act ions, claim s, proceedings, dem ands, cost s, expenses, dam ages, and ot her liabilit ies what soever or howsoever caused arising direct ly or indirect ly in connect ion wit h, in relat ion t o or arising out of t he use of t he Cont ent . This art icle m ay be used for research, t eaching, and privat e st udy purposes. Any subst ant ial or syst em at ic reproduct ion, redist ribut ion, reselling, loan, sub- licensing, syst em at ic supply, or dist ribut ion in any form t o anyone is expressly forbidden. Term s & Downloaded by [University of Kentucky], [Charles Dainoff] at 13:03 19 February 2015 Condit ions of access and use can be found at ht t p: / / www.t andfonline.com / page/ t erm sand- condit ions Central Asian Survey, 2015 http://dx.doi.org/10.1080/02634937.2015.1008795 Offshore gas intermediary companies in Eurasia Stacy Clossona* and Charles Dainoffb a Downloaded by [University of Kentucky], [Charles Dainoff] at 13:03 19 February 2015 b Patterson School of Diplomacy and International Commerce, University of Kentucky, Lexington, USA; Department of Political Science, University of Kentucky, Lexington, USA Gazprom’s utilization of offshore registration – or the moving of money across national boundaries for reasons other than of direct business benefit – has resulted in the creation of a web of subsidiary companies with opaque leadership and financial arrangements. Some of these subsidiary companies operate as intermediaries in the natural gas trade among the former Soviet states. Given that the gas trade within Eurasia has a long history of fixed contracts that move gas through a network of pipelines, why were intermediaries created, and why register them offshore? Using a critical reading of stateness as a space for transnational networks, and supported by mind-mapping software, we analysed the structure and operations of offshore gas intermediary companies between Russia and Central Asia dating from the break-up of the Soviet Union. We conclude that there were several purposes for using intermediary gas companies, from navigating trade among the newly independent states, to asset stripping, monopolizing markets, and obfuscating finance and ownership. However, the usefulness of intermediary companies to Gazprom may have expired, as a confluence of increased competition among suppliers, diversification of export routes, and economic stagnation has led to exporters and importers calling for their end. Keywords: intermediary; natural gas; Central Asia; Russia; network; offshore Introduction The myth of isolationism is prevalent in discussions of Central Asia’s economies. Policy-makers have long sought an effective way to include Central Asian states in the global economy, and the oil and gas markets seemed a logical place to start. However, the sole dependence on single export routes and on the price of one buyer – Russia – has dominated the discourse on energy economics and politics in Central Asia since the early 1990s. Dependence on imported gas and the lack of geographical connections between domestic pipeline infrastructures have exacerbated this problem, but newer pipeline construction from Central Asia to Europe, the Middle East and Asia has begun to alleviate some of these challenges. In fact, the Central Asian gas trade has been part of a transnational operation involving the use of offshore registration of companies prevalent since the break-up of the Soviet Union. Informal elite relations survived the demise of the union of republics, ensuring that the gas trade continued and that middlemen tied to political regimes received vast sums of money. The economics of the gas trade was fused with the politics of the countries, creating a new network of elites among the region’s leaders. It was not that the will to promote trade liberalization was lacking among these elites, but rather that their will was directed toward non-transparent business practices for political and financial gain. Many large economic assets became controlled through public–private ownership with opaque corporate governance mechanisms, and many of these assets entered the global market. *Corresponding author. Email: stacy.closson@uky.edu © 2015 Southseries Inc Downloaded by [University of Kentucky], [Charles Dainoff] at 13:03 19 February 2015 2 S. Closson and C. Dainoff Today, the system of big business and politics has become much more complex and multilayered, involving a protean set of relations among trusted contacts in government and informal ownership by top-level bureaucrats and politicians, crossing borders in the pursuit of business opportunities (Franke, Gawrich, and Alakbarov 2009; Kjærnet, Satpaev, and Torjesen 2008; Schmitz 2003). Through the creation of networks of influence based on complex ownership structures, Eurasian states are able to reward members and thereby retain allegiance. To take the most significant example, Russia, through its majority state-owned company, Gazprom, uses intermediary companies to act with a higher degree of autonomy in the energy sector. Russian gas intermediary companies almost always involve an energy-production state, a transit state, and Russia itself as the agent state. The utility of intermediaries has been equally high in energy-producing states, as they provide rents not easily tracked by governmental regulatory agencies. When these intermediary companies are registered offshore, they achieve even greater opacity. There are limits to researching intermediary gas companies registered offshore. Obtaining data and gaining access to – and answers from – those engaged in the gas business in Eurasia is difficult. There is also the challenge of the lack of generally accepted accounting practices at these companies: they are by nature non-transparent, making it difficult to link the flow of capital accurately between entities. Our analysis is based on an accumulation of varied secondary sources, including press and non-governmental organization reports of the existence of intermediary companies. Once we had a list of intermediaries, we turned to company websites to discern their ownership structures. When available, we placed this information into mind-mapping software called TheBrain (http://thebrain.com). The resulting map clarifies the relationships between the hundreds of companies Gazprom owns and the connections those companies have to others. See for example Figure 1, in which just some of Gazprom’s gas-trading subsidiaries are mapped, covering a geographical area from Gibraltar to Kyrgyzstan and encompassing at least 248 companies. We believe TheBrain to be particularly appropriate for this topic because intermediaries are created for the purpose of obfuscation. Intermediary companies are often created between two official companies with an often hidden ‘other’ tied back to a third or fourth company that may also be owned by the parent company. Pieces of information or entities can be placed within TheBrain to help visualize the network on multiple levels, including links among companies. TheBrain then helps decipher the relations within a multi-nodal network by simulating connections, creating a heliographic depiction. The complex picture of Gazprom and its subsidiary companies is more visually decipherable, and therefore more comprehensible, with information attached to nodes in the network. It is for this reason that TheBrain is an improvement over previous techniques for assessing ties among seemingly disparate organizations. This article first discusses the framework of informal elite relations and the use of network studies in Eurasia. The concept of intermediary firms as offshore vehicles is then presented, and how this relates to the literature on Eurasian gas politics and relations. It then addresses the evolution of intermediary gas companies within the former Soviet states aligned with Gazprom’s changing strategies on gas trade, with particular reference to Central Asia. We conclude that there were several purposes for using intermediary gas companies, from navigating trade among the newly independent states, to asset stripping, monopolizing markets, and obfuscating finance and ownership. However, the usefulness of intermediary companies to Gazprom may have expired, as a confluence of increased competition among suppliers, diversification of export routes, and economic stagnation has led to exporters’ and importers’ calling for their end. Downloaded by [University of Kentucky], [Charles Dainoff] at 13:03 19 February 2015 Figure 1. Mind-mapped image of Gazprom and some of its subsidiaries. Source: The Authors. Central Asian Survey 3 Downloaded by [University of Kentucky], [Charles Dainoff] at 13:03 19 February 2015 4 S. Closson and C. Dainoff Framework: informal elite relations and network studies in Eurasia1 The informal nature of business in the Eurasian region is rooted in the Soviet patrimonial system, which is designed to guarantee the survival of the leaders and their close cohorts in an economy of persistent shortage. The system is defined by graft between those in power and those working in state and private institutions, who gain their positions as a reward for their loyalty. This makes leaders beholden to informal vested interests instead of market dynamics (Collins 2005, 2006, 2009; Cummings 2005; Jonson 1998; Schatz 2004). The government-led privatization process of the 1990s solidified the informal dynamics, and because the gains made in the privatization period were not perceived as fully legitimate by most of the post-Soviet state’s citizens, business owners sought to entrench their property rights through informal political protection and guarantees for economic arrangements. As a result, influential state actors became patrons of these business groups as they scrambled for a share in the country’s resources. More often than not, these businesses were registered offshore, to further guarantee that their clientelistic relationships remained intact. Paralleling the growing consensus in the late 1990s that the post-Soviet states were indeed not transitioning to liberalized economies governed by the rule of law, there are network studies to explain why this was the case. The first uses of network analysis trace the reconstitution of Soviet societal formations in the 1990s, including networks that exchanged favours, or blat (Ledeneva 1998, 2004), and networks that constitute government structures based on patrimonialism and the exchange of favours (Bremmer and Welt 1997; Cheloukhine and King 2007; Kurkchiyan 2000). The second analytical approach evaluates whether the intertwining of business and political elites is responsible for the lack of economic development, with some studies concluding that there has been little change from the domination of the Soviet nomenklatura (Khrystanovskaya and White 1996; Kirkow, Hanson, and Treivish 1998). In addition, network studies utilizing quantitative analysis detect the presence of new business actors, particularly in Russia’s regions (Hughes, John, and Sasse 2002), concluding that different elites form networks of distinct subgroups or factions with significantly different patterns of affiliation (Buck 2007). The third approach explores the role of networks as a mechanism for conducting transactions between markets and bureaucratic regulation, usurping the state. Several studies have analysed networks comprised of formal state actors using their positions to collude with transnational actors for financial gain (Cummings 2005; Jones Luong 2002; Jonson 1998; Wedel 2003), while other studies focused on indigenous clan structures in the Caucasus and Central Asia that operated in parallel with the formal structures (Collins 2005, 2006; Mirimanova 2006; Ilkhamov 2007; Schatz 2004). The present article introduces a fourth approach to network studies that reconceptualizes the state as a space for the activities of a confluence of state, non-state, global and local actors traversing territories in a confluence of networks, based on a critical reading of stateness (Holsti 1996; Linz and Stepan 1996). This approach allows us to transpose Russian and Central Asian networks onto Clarke’s (1999) ‘glocal’ medium and reconstitute the ‘idea’ of the state as an arena of conflicting groups and interests. By necessity, this approach begins with a re-examination of the actors operating within the state, the system in which they operate, and how the state serves their objectives (Smith, Booth, and Zalewski 1996). The networks in the case of intermediary gas companies are all elite, with direct or indirect connections to the state, crossing national boundaries, in order to conduct the natural gas trade. They operate according to ‘local rules’ (Cooley 2012, ch. 2), including regime survival, use of state resources for private gain, and brokering between external actors and local constituencies. As the ownership structures of these companies are sometimes unknown, it is not specific actors who are of importance in these networks, but the linkages between companies and the deliberate offshoring of ownership and financial Central Asian Survey 5 Downloaded by [University of Kentucky], [Charles Dainoff] at 13:03 19 February 2015 information to obscure linkages, which are of more relevance to both to this analysis and the ultimate successful operation of these networks. Offshore vehicles and intermediaries Companies that are intermediaries are defined by the purpose they serve, rather than their ownership structure. If a company acts to serve an intermediating purpose for its owners, then that company can fairly be defined as an intermediary. Intermediaries are common in business practices globally, but the use of intermediaries in global gas trade is almost unique to Russian trade within Eurasia and Europe. Russian-related natural gas intermediaries are often registered in countries globally recognized as offshore financial centres (OFCs). Offshoring involves the use or movement of money across national borders for reasons that have little or nothing to do with the normal conduct of business but include transferring money to another jurisdiction to conceal it from regulators or other authorities, to avoid paying taxes or to gain some other extra-legal financial advantage. This process can also involve the formation of companies in countries with strict bank secrecy laws as a way of protecting financial transfers or certain corporate activities from unwanted outside attention from the authorities, the media, or vested interests. One of the most common methods of offshoring is for a parent company or group of companies to create a new corporate entity ostensibly designed to serve a single purpose, but which acts to hide or permit the siphoning off of income from that activity. More than 90 countries have created a package of regulations including strict bank secrecy laws that have earned them the designation ‘secrecy jurisdictions’ (SJs) by international regulators (OECD 2007, 61–64). Also known colloquially as ‘tax havens’, these countries offer their customers the ability to open bank accounts, form corporations, buy bearer debt and purchase real estate with a minimum of cost, effort, or proof of identity.2 An SJ has well-developed local service economies of lawyers and bankers that facilitate this process. These countries tend to be small, resource-poor, and formerly dependent upon a colonial patron or industrialized nation for their economic and political stability (Irish 1982). Geographically, they are clustered in three areas: the Caribbean Ocean and Central America (e.g. the Cayman Islands); Western Europe (e.g. Luxembourg, Switzerland); and the South Pacific (e.g. Vanuatu). Conservative estimates put the total amount of private wealth invested in countries with strict bank secrecy laws at up to USD 32 trillion, with up to USD 9.3 trillion of that amount in bank accounts opaque to the rest of the world (Henry 2012). Another source estimates that more than 6% of all global wealth or assets held in a country where the investor has no legal residence or tax domicile is managed through offshore accounts (Bos. Consulting Group 2011). This money has been invested either by individuals or in the name of one of the 3.5 million shell corporations established in these countries to give investors an additional layer of anonymity (Henry 2012). If Global Suisse’s estimate of total global wealth of USD 231 trillion is accurate, then it is possible that up to 14% of the world’s wealth is held offshore (Credit Suisse 2011). Offshore finance and tax havens have been covered by geographers through case studies (see Wocjik 2012 for a review) and theories (see Cobb 2001 for a review) from the late 1980s until 2000. However, as Wocjik (2012) comments, geographers stopped focusing on offshore finance just as finance became more important to the global economy. Beginning in 2008, well-publicized cross-border tax evasion scandals focused political attention on OFCs. Political scientists have addressed OFCs as actors in the international political economy (Palan, Murphy, and Chavagneux 2010; Sharman 2010). Sharman’s (2010, 2) conceptualization of ‘calculated ambiguity’ captures the desire of those registering offshore to retain the advantages of ownership while divesting themselves of the liabilities. The literature on OFCs has also begun to assess lawful efforts to curb offshoring (see e.g. Grinberg 2012). There is also an effort to Downloaded by [University of Kentucky], [Charles Dainoff] at 13:03 19 February 2015 6 S. Closson and C. Dainoff discern whether OFCs are harmful, or whether they have unintended positive consequences for neighbours (Rose and Spiegel 2007) or for international capital flows (Zhixiang 2008). The findings of the academic literature on offshoring have direct implications for the analysis of Eurasian gas politics and relations. Russia has an extremely high percentage of offshore-registered companies, and Russian businesses are known to obscure the final beneficiaries of services to evade taxes (Kalotay 2012). Koroliuk and Rudenko (2014, 131) report: ‘Many foreign companies, especially those working in the oil-gas and metal sectors, the Russian multinationals acquired by setting formal control over holdings in the UK, the Netherlands, Luxembourg, Ireland, Switzerland, and even Canada.’ The Russian oil and gas multinational Lukoil, for example, exercises all exploration projects in other countries through a company registered in the British Virgin Islands. There is also a history of financial diversion in Eurasia. Money laundering in the Pacific island of Nauru has resulted in several Eurasia-related scandals, from the transfer in 1998 from Russian banks of USD 70 billion to offshore accounts, including some in Nauru, at a time when it received almost that same amount from the IMF. In Ukraine, a former deputy prime minister, Yulia Tymoshenko, was accused of transferring about USD 1 billion from United Energy Systems of Ukraine through an account in Latvia – another country universally recognized as an SJ – to a Nauru-based bank owned by former prime minister Pavlo Lazarenko, allegedly to buy gas (Van Fossen 2003, cited in Palan, Murphy, and Chavagneux 2010). Russia and Ukraine have also created internal tax havens, where businesses, including those in the energy sector, locate and pay reduced taxes in secret arrangements, which then can be used to send capital to tax havens abroad (Haiduk 2007, cited in Palan, Murphy, and Chavagneux 2010). It was in this way that the Russian central bank was able to hide USD 150 billion in a fund incorporated in Jersey in the late 1990s (Palan, Murphy, and Chavagneux 2010). In fact, the Global Financial Integrity (2013) report on Russia estimates a loss of at least USD 211.5 billion in illicit financial outflows from 1994 to 2011, with 63.8% of these illicit financial outflows, or USD 135 billion, leaving Russia through unrecorded wire transactions, and USD 552.9 billion in illicit inflows to the Russian economy, primarily through trade-based money laundering. The outflows, the report finds, represent the proceeds of crime, corruption and tax evasion, and have serious negative consequences for the Russian economy. Out of 118 countries, Russia ranked 3rd, and the Central Asian state Kazakhstan 12th, for the most illicit flows from these countries from 2000 to 2009. Of the other Central Asian states, Azerbaijan was 33rd, and Tajikistan 85th (Global Financial Integrity 2013, Table 4). Many of Gazprom’s intermediary companies doing business in Eurasia are registered in Switzerland (see Table 1). Irish (1982, 459) defines Switzerland as a ‘tax treaty haven’ rather than a pure or liberal tax haven: ‘Tax treaty havens are parties to tax treaties under which they offer access to attractive markets to individuals and corporations who are generally not residents of the havens, on favourable tax terms.’ For example, Gazprom Schweiz AG, a subsidiary of Gazprom Germania, is registered in Switzerland. It purchases natural gas in Uzbekistan, Turkmenistan and Azerbaijan and transports it to Europe. Over 90% of the gas is sold to other Gazprom Group companies, with the remaining gas sold directly to buyers in Central Asia and Europe. Other Gazprom intermediary companies, particularly those engaged in investment, media ownership, banking, and oil and gas exploration, are registered offshore in the Cayman Islands, Cyprus, Gibraltar and the British Virgin Islands. These are ‘pure tax havens’ according to Irish (454–55); they impose no direct taxes on income profits or capital gains and do not have death duties, succession taxes, or gift and inheritance taxes. Understanding the role of offshoring in the gas trade also contributes to the literature on corruption in energy-rich Central Asian states like Kazakhstan, Azerbaijan and Turkmenistan that are highly dependent upon natural resource revenues (Kalyuzhnova, Kutan, and Yigit 2009). The Company RosUkrEnergo (RUE) Country registered Armrosgazprom Gazprom Dobycha Orenburg Zarubezhneftegaz Switzerland (operates in Ukraine) Armenia Russia Russia TsentrCaspneftegaz Gazprom Neft Asia Kazakhstan Kyrgyzstan Gazprom Schweiz AG (subsidiary of Gazprom Germania) Switzerland ZMB GmbH (subsidiary of Gazprom Germania) Gazprom Germania (subsidiary of Gazprom Export) Gazprom Export Switzerland Germany Morneftgazproject Russia KazRosGaz Kazakhstan Zeromax Eural TG Switzerland Hungary Russia Activity in Central Asia Gazprom sells its Central Asian gas to RUE, which resells it to Ukraine. Sale of Gazprom gas in Armenia. Processes KazRosGaz gas from the Karachaganak field in Kazakhstan. Production sharing agreement signed with Swiss company Gas Project Development Central Asia AG and Uzbekneftegaz to create Zarubezhneftegaz – GPD Central Asia to carry out the agreement. Company then absorbed into Gazprom EP International, which runs upstream development projects in Uzbekistan, Tajikistan, Kyrgyzstan, Vietnam, Libya, Algeria, Nigeria, Venezuela, Bolivia, Bangladesh and India. Created by Gazprom and Lukoil to explore future Kazakh oil and gas fields Buys and sells petroleum and liquefied petroleum gas in Kyrgyzstan. The company is a subsidiary of Gazprom Neft, which is itself a subsidiary of Gazprom. Purchases gas in Uzbekistan, Kazakhstan, Turkmenistan and Azerbaijan and transports it from Central Asia to Europe, where it is then sold. Over 90% of the natural gas produced is sold to other Gazprom Group companies, with Gazprom Schweiz AG selling the remaining gas directly to its own buyers in Central Asia and Europe. Gazprom Schweiz AG also owns shares in Uzbek natural gas producer Gissarneftgaz. Trades natural gas in Uzbekistan; owns stock in Bosphorus Gaz Corporation of Turkey, among others. Purchases all Central Asian gas for Gazprom. Signed a 25-year cooperation agreement with Turkmenneftegaz to buy gas from Turkmenistan, as well as a contract to sell natural gas with the State Oil Company of Azerbaijan Republic (SOCAR). Constructs and develops offshore oil and gas production facilities in Azerbaijan, in addition to Russia and Vietnam. Founded by Gazprom, Rosneft, and CD8 ME Rubin. Joint venture (50/50) with KazMunaiGaz to operate Karachaganak oil and gas fields in Kazakhstan. Purchased by Gazprom to trade oil and gas in Uzbekistan. Exports gas to Ukraine from Uzbekistan and Turkmenistan. Succeeded by RosUkrEnergo. 7 Sources: Russian Financial Control Monitor, “Gazprom consolidates Austrian gas trader,” April 20, 2011, “Gazprom to buy assets of Swiss Zeromax in Uzbekistan,” February 2, 2007, “Gazprom to gain foothold in Turkey,” August 20, 2009. SKIRIN Market and Corporate News, “Gazprom Germania reports 1st quarter 2010 results,” September 15, 2010. Moscow Times, “The mob, an actress, and a pile of cash,” November 27, 2003, “Investigators in Kiev visit Naftogaz office,” August 15, 2005. KIRIN Market and Corporate News, “ZMB GmbH opens representation in Uzbekistan,” November 15, 2007. Russian Oil and Gas Report, “Gazprom bought a 4.45% stake in ArmRosGazprom,” April 1, 2009. Armenpress News Agency, “Voting for Armenian-Russian ‘gas’ agreements to hold on December 23,” December 20, 2013. Gazprom Schweiz AG web site (http://www.gazprom-schweiz.ch/en.html). Morneftgazproject web site (http://www.mngproject.ru/en/). Gazprom web site (http://www.gazprom.com). Gazprom International web site (http://www.gazprom-schweiz.ch/en.html). Central Asian Survey Downloaded by [University of Kentucky], [Charles Dainoff] at 13:03 19 February 2015 Table 1. Gazprom intermediary companies doing gas business in Eurasia. Downloaded by [University of Kentucky], [Charles Dainoff] at 13:03 19 February 2015 8 S. Closson and C. Dainoff majority of the literature in economics and political science argues that access to oil profits tends to result in weakly institutionalized states and poor economic performance (Aslaksen 2010; Goldberg, Wibbels, and Myukiyehe 2008; Jensen and Wanchekon 2004; Papaioannou and Siourounis 2008; Ross 2009; Ross 2012; Smith 2004, 2007; Wantchekon 2002). Oil-dependent states are deemed to be particularly vulnerable to the problems of patronage, corruption, bribery and nepotism, using the rent-distribution process to reward loyalty over merit and maintain a clientelist governance structure (Leite and Weidman 1999; Sandbakken 2006). Resource-dependent countries tend also to regard these revenue streams as an asset base, which in turn causes permanent increases in the spending levels allocated within a budget (Collier and Gunning 1999), so that in times of revenue shortages, countries must cover budget shortfalls by borrowing. As the value of the exporting nation’s currency rises in comparison to other nations’ currencies, non-resource industries are uncompetitive in the global market, and citizens turn to less expensive imported goods (Collier 2007). Further, revenues from the export of natural resources tend to be volatile, which can translate into currency rate volatility in resource-dependent countries, leading to depressed wage rates in the non-booming sector and an increase in other commodity prices (Van der Ploeg and Poelhekke 2009). Underresearched in this literature, however, is how offshore registration contributes to corruption in the Eurasian energy sector. Gazprom and intermediary companies The Soviet Ministry of Gas Industry was created in 1979 and started producing gas in 1984. The ministry was transformed into Gazprom in 1989 and was partly privatized, but the state maintained a slight majority share in its ownership. Gazprom created several hundred subsidiaries globally, owned and controlled directly or indirectly. One type of subsidiary was the gas trading intermediary, and their numbers in Russia’s gas business expanded after 1991. They were jointly created by Russia’s state gas company, Gazprom, and the consumer state’s national company, with a small percentage of ‘other’. Often Soviet nomenklatura who had previously worked together headed both the intermediaries and the state gas companies on both sides. As a result of this relationship, intermediaries often expanded into joint ventures, subsidiaries and trading companies, frequently registered offshore, rendering ownership non-transparent but rumoured to be related to politicians in the producer and consumer states (Closson 2013). There have been three waves of widespread use of intermediary companies tied to Gazprom’s development, the first two identified by Balmaceda (2008). The first wave took place between 1992 and 2000, coincident with the mass privatization of Russian energy-sector assets. Another feature of this period was the difficulty of making deals with the Eurasian states that acted as an export market for Russian gas thanks to their widespread use of barter and a serious reluctance to pay in most of the countries. When Gazprom established its office in the former premises of the Soviet Gas Industry Ministry and became a private company in 1992, the first president of Gazprom, Rem Vyakhirev, and the company’s founder (and then prime minister of Russia), Viktor Chernomyrdin, set out to generate maximum profits. In some cases, profit maximization meant bypassing Russian legal acts, evading taxes on a large scale, and paying few dividends to the state (Baciulis 2011). While chairman of Gazprom from 1992 to 2001, Vyakhirev engaged in stripping the assets of the former Soviet energy complex. Many of these assets went to the privately owned energy holding company Itera, which was run by Vyakhirev’s relatives and registered in Florida, thousands of miles from the Eurasian oil and gas fields it was presumably engaged in servicing. Global Witness (2006) has assessed that registration in the US allowed an extensive credit line Downloaded by [University of Kentucky], [Charles Dainoff] at 13:03 19 February 2015 Central Asian Survey 9 of USD 880 million in loans for Itera from Gazprom. In Figure 2, Itera’s accumulated links with companies from Europe to Central Asia are displayed. The companies to the far left are companies with which Itera was participating in joint ventures. The companies below and right are subsidiaries. Russia monopolized the transit of Central Asian gas to Europe. Almost all Central Asian gas was sent through the Gazprom-controlled Central Asian–Caspian gas pipeline system completed in 1988. Only small amounts of gas from Azerbaijan were shipped to Turkey and sent through pipe from Turkmenistan to Iran. To this end, Russia discouraged market infrastructure alternatives to affect gas-to-gas competition by providing enticements to Central Asian governments. Enticements usually took the form of buying transit gas from Central Asia to subsidize the Russian market, leaving Russian-supplied gas for sale to higher paying European customers. The vehicle for overseeing these transactions was intermediary companies, usually created between Gazprom, a second state’s national company, and several undisclosed shareholders. Beginning in 1995, Russia and Central Asian states produced and marketed gas through the intermediary Itera, a gas company whose leader had close ties to the Turkmen president of that time. In the case of Turkmenistan, a joint venture, TurkmenRosGaz, was created by Turkmen President Niyazov to work with Itera (Global Witness 2006). Gas trade operated as barter and swap operations, with Turkmenistan supplying gas to Ukraine; Ukraine paying Itera in gas supply and other goods; and Itera paying Gazprom for transit. It operated at a time when Central Asian countries were desperately short of finance and barter was the only viable way to buoy trade. Vyakhirev and Chernomyrdin were also determined to use Itera in gas trading within Eurasia. Russian authorities wanted to avoid accumulated state debt for gas sales to customers in the former Soviet republics who were unable to pay, including Armenia, Georgia, Moldova and Ukraine, so Itera revitalized the barter system between Turkmenistan in Ukraine in gas deliveries, receiving gas at lower prices than the state-owned companies in the importing countries (Baciulis 2011). For example, Itera was able to buy gas from Turkmenistan at discounted prices, use Gazprom’s pipeline system to transport it into Russia, and then sell the gas back to Gazprom for domestic consumption or re-export at a price that was marked up even after transport fees were paid (Global Witness 2006). And, with money in Western banks, the company could guarantee both sides to deliver on their contractual promises (Jervalidze 2006). This attracted Soviet republics to the intermediaries rather than to Gazprom. By 2000, Itera was the largest intra-Eurasian gas trader, with deliveries of 45.1 billion m3, compared to Gazprom’s deliveries of 43.4 billion m3. Itera was responsible for delivering a quarter of the gas supply to the Baltic states, Moldova, and Belarus, and half of Ukraine’s (Heinrich 2008). Figure 2. Mind-mapped image of Itera and subsidiaries and partners. Source: The Authors. Downloaded by [University of Kentucky], [Charles Dainoff] at 13:03 19 February 2015 10 S. Closson and C. Dainoff Russia used the same type of intermediary arrangement with gas exports from Uzbekistan. From 1997 to 2001, Uzbekneftegaz exported gas to Kazakhstan, Russia and Ukraine via the Switzerland-based Gaspex. In early 2001, a consortium of Itera, the Donbass Industrial Union (Ukraine), Debis (Germany) and Zeromax (also Switzerland) won the tender for export of gas from Uzbekistan. Zeromax was allegedly run by the president of Uzbekistan’s daughter, Gulnara Karimova, until it was shut down in 2010. The export price was set at USD 40 per 1000 m3, with payment in cash and in-kind goods and services. In 2003, Gazprom took over Itera operations in Uzbekistan through Uzbekneftegaz intermediary company Eural TG, which became the intermediary for selling Uzbek gas to Ukraine. In Kazakhstan, the exporter of dry natural gas was not strictly a Kazakh entity but an intermediary company jointly created with Gazprom, KazRosGaz, formed in 2002. KazRosGaz, a joint venture, began as an intermediary between Russia and Kazakhstan for Karachaganak gas sales, but also became involved in selling gas from Uzbekistan to Kazakhstan as early as 2006. Russian gas trading within Central Asia is due, in part, to the formally integrated gas system that still requires the aforementioned swapping of gas. After the discovery of the Kashagan field in 2000, Kazakhstan established KazTransGaz, which took over Intergaz Central Asia from Tractebel. Gazprom subsequently became the main partner of Intergaz Central Asia, responsible for 88% of the revenues of the Kazakh gas transportation company, essentially paying revenues to itself. This company transited Central Asian gas bought by Gazprom from Turkmenistan and Uzbekistan via the Central Asia–Centre and Bukhara–Urals gas trunk lines to Russia. Gazprom controlled the gas once it crossed the Russia–Turkmenistan border, but Uzbek gas transiting into Kazakhstan remained under Gazprom’s direct control, and Gazprom then swapped Kazakhstan for the same volume of gas to be delivered to the Orenburg refining plant in Russia from the Karachaganak field in Kazakhstan (Olcott 2007; Yenikeyeff 2008). During this time, Russia also moved downstream further into Europe, handling substantial amounts of gas under long-term contracts through intermediaries such as Wingas in Germany (Stern 2005). Intermediaries also traded gas outside the framework of long-term contracts in Europe, such as Gaz Trading in Poland (with PGNiG), Fragaz in France, Promgaz in Greece, and Dujotekana in Lithuania (see Loskot-Strachota 2009 for a complete list). The second wave of intermediaries, between 2000 and 2009, signalled a renationalization of Russia’s national energy sector. Upon becoming president of Russia, Vladimir Putin started replacing the managers of all the big energy concerns. Gazprom believed that it could undercut Itera and was determined to replace it as the main importer of Turkmen gas (Heinrich 2008). At the same time, Gazprom subsidiaries lost their right to gas pools and export quotas, leaving Gazprom to become the monopolist in the gas trade. Not a single independent company in Russia or in Central Asia could supply gas to consumers without Gazprom’s permission and without paying it a fee (Baciulis 2011). In addition, Gazprom changed its strategy of forming new intermediaries to strengthen allegiance to Moscow. In Lithuania, previous intermediaries – Stela Vitae, Itera Lithuania – were replaced by Putin’s newly established company Dujotekana, whose principal shareholder was former KGB officer Piotr Vojeika (Baciulis 2011). During this second period, President Putin also turned the leadership of Gazprom over to Dmitry Medvedev and Alexei Miller, former colleagues of his from the St Petersburg government in the 1990s. Gazprom’s long-term head, Viktor Chernomyrdin, was strategically reassigned, and was appointed Russia’s ambassador to Ukraine in 2001. This appointment was important for informal gas negotiations and trade issues between Russia, Ukraine and Central Asia, taking into account Chernomyrdin’s role in promoting Itera and in assisting post-Yeltsin corporate gas agents in Gazprom’s deals with Ukraine and Central Asian producers. Miller and Medvedev were tasked with bringing an end to over a decade of asset-stripping and with regaining property lost during the frenzy. As part of this effort, Gazprom further denied Itera access to Gazprom’s Downloaded by [University of Kentucky], [Charles Dainoff] at 13:03 19 February 2015 Central Asian Survey 11 pipelines, forcing Itera to sell assets back to Gazprom. In the trade with Ukraine’s Naftogaz Ukrayiny, President Putin had Itera replaced with a Eural Trans Gas, a company registered in Hungary, and ensured the intermediary a credit line from Gazprom (Global Witness 2006). After 2004, President Putin wanted to raise the prices of Eurasia’s gas to European levels, and the gas trade was mired in both sides’ attempts to use their position to gain advantage over the other. Because gas prices had not changed for a decade, pressure to change the gas trading arrangement was low, and the use of intermediaries in general remained steady until 2005. This changed after 2006, beginning with disputes between Russia and Ukraine over fees. Ukraine had over 80% of the Russian gas transit to Western Europe, but held a weakening position as a dependent customer, as well as a debtor to Gazprom. Heinrich (2003, 51) explains: ‘Because of long-lasting quarrels with Ukraine over transit fees, and because of accusations that gas was being siphoned off during transit, Gazprom developed plans for alternative transit routes to break the transit across Eurasia as much as possible.’ During this time, the latest intermediary, RosUkrEnergo (owned by Gazprombank and two Ukrainian businessmen and registered in Zug, Switzerland), was formed in 2004. The intermediary was responsible for transport, as well as all Ukrainian gas imports from Central Asia and Russia. Ukraine’s UkrGazEnergo (jointly owned by RosUkrEnergo and NaftoGazUkrainy) distributed gas to industrial users in Ukraine, while Ukraine’s state-owned NaftoGazUkrainy was left with residential customers. By fall 2008, Ukraine had accrued a high debt to RosUkrEnergo, which could be paid either in cash or in transit services. Ukraine rejected this, and the situation escalated to a gas cut-off for Ukraine and Central European customers. It was, strictly speaking, a dispute between Russian-owned companies, UkrGazEnergo owing RosUkrEnergo. Gazprom also attempted to weaken the position of Central Asian gas producers, who were, in turn, trying to diversify their market access. At the beginning of this period, each of these producers was still dependent on the Russian pipeline system for gas exports. Gazprom was determined to create a unified energy system within Eurasia by acquiring controlling stakes in energy companies through the exercise of property rights and the establishment of joint ventures (Heinrich 2008). Russia planned to spend significant funds on geological exploration, development of fields, and transportation and pipeline infrastructure. However, after 2009, Russia’s hold on Central Asian gas trade weakened. The Central Asian–Caspian pipeline linking the region to Russia was mysteriously blown up in April 2009 amid a dispute over gas pricing between Turkmenistan and Russia, after which a pipeline from Turkmenistan through Uzbekistan into China was completed, making China’s CNPC the dominant regional gas trader. In addition, Turkmenistan completed another gas pipeline to Iran, while Uzbekistan made deals to supply gas to Kyrgyzstan without including Gazprom. It is unknown whether Central Asian states have used intermediary companies with China. China did acquire a significant stake in Kazakhstan’s offshore Kashagan field, but did not use an intermediary. China has also gained access to lucrative on-shore exploration in Turkmenistan in its direct contract with Turkmengaz for supply. Chinese companies have bought Kazakh government assets in the oil sector, and the Kazakhstan–Chinese oil pipeline is a 50-50 joint venture between state companies. Perhaps China is more interested in asset procurement than in offshoring energy trade. There was also an increase in dissatisfaction with the use of intermediaries. President Putin had an audit conducted of the intermediaries, and as a result Gazexport (now Gazprom Export) chief Yury Vyakhirev (son of Gazprom’s Chairman Rem) lost his post (Balmaceda 2008). The special commission found that ‘unexplained sums’ were written off from Gazexport’s balance sheets, even as Bulgaria’s Overgas, Serbia’s Progressgas, and Poland’s Bartimpex and GasTrading did not pay for six months of deliveries totalling USD 144 million (Mazneva, Reznik, and Tovkailo 2010). On the side of the Russia gas importers, government dissatisfaction increased Downloaded by [University of Kentucky], [Charles Dainoff] at 13:03 19 February 2015 12 S. Closson and C. Dainoff because these intermediary arrangements meant that companies did not pay tax. In Lithuania, for example, the original companies Uspaskich and Jangila were accused of tax evasion and replaced (Baciulis 2011). In discussing the role of Eural Trans Gas, Vadim Kleiner (2004), research director at Hermitage Capital Management (which owned a significant stake in Gazprom at the time), argued against the role of the intermediary. The intermediary company, he said, ‘received an estimated USD 767 million in 2003 for doing business that should have been done completely by Gazprom, which doesn’t make sense’. He subsequently became a member of Gazprom’s board. This second period ended negatively for Gazprom. The 2008 global financial crisis took Gazprom from being the single biggest international oil trading company to a 50% drop in capital within a year. The confluence of a decline in European gas demand, due largely to the financial crisis, increased competition from liquefied natural gas from the Persian Gulf, and the fallout from the 2009 gas dispute with Ukraine hit Gazprom’s revenues hard. A third phase in intermediary development can be detected starting in 2010. The Russian government attempted to take over independent intermediaries in order to further consolidate the profits from the gas trade (Closson 2013). These take-over attempts were probably related to Russia’s difficult relationship with Ukraine, centred on the intermediary RosUkrEnergo, which resulted in gas cut-offs to Europe in 2006 and 2009. Prime Minister Putin announced in March 2010 that his government would launch another investigation into the intermediaries. Dmitry Peskov, then Putin’s spokesman, said that the government’s ‘general trajectory is to eliminate unnecessary intermediaries and move all contracts to a direct and transparent track’. It is also possible that Russian government take-over attempts may be related to the export scheme of Cyprus-registered Tancredo Enterprises, which is part-owned by a Gazprombank subsidiary (Russia & CIS Oil and Gas Weekly 2010). In October 2009, two sources at Gazprom-controlled companies described the situation to Vedomosti, a Russian newspaper (Prime-Tass 2010). Gazprombank-controlled Sibneftegaz was selling gas to Gazprom firms, which were exporting the fuel and selling it to Tancredo. Tancredo, in turn, was selling the gas back to Gazprom at European prices, which were almost five times the prices in Russia. It is unclear how much gas was sold under the scheme (Mazneva, Reznik, and Tovkailo 2010). The Russian government’s about-face on intermediaries could also be related to growing dissent from European customers, particularly Bulgaria, who in 2010 asked that Gazprom Bulgaria, the intermediary, be excluded from gas imports from Russia. An internal report conducted by Gazprom allegedly provoked a feud between the financial and export sectors of the company during an internal review of expert schemes. The conclusion of the review reads: ‘The existing scheme for the export of natural gas is optimal, and any changes to it would be dangerous. The exclusion of companies from existing delivery chains, as well as their change, might be used by European consumers as grounds for changing to their advantage the balance of interests of seller and buyer’ (Noinvite.Com 2010). Since then, Gazprom’s monopoly on gas development and trading has weakened. In 2012, newly elected President Putin’s policy was to expand the trading to competitors such as Novatek, Russia’s largest independent gas producer. Igor Sechin left the president’s side in 2012, after 8 years as his main energy negotiator, and returned full-time to the chairmanship of Rosneft. In this capacity, he has engineered the take-over of TNK-BP and finalized a deal with ExxonMobil for a new liquefied natural gas facility in the Russian Far East. Most relevant to this study, Rosneft, still state-owned, acquired 100% control of Itera from founder Igor Makarov in a bid to take on domestic rivals Gazprom and Novatek (Weaver 2013). At the same time, the European Commission launched anti-trust cases against Gazprom intermediaries for potentially violating the Third Energy Package, which forbids the producer and transporter of natural gas to also be the distributor to an EU member state (Riley and Umbach 2007). Inspections took place at Gazprom Germania, Lietuvos Dujos, Eesti Gaas, Latvijas Gaze, Vemex and Downloaded by [University of Kentucky], [Charles Dainoff] at 13:03 19 February 2015 Central Asian Survey 13 Figure 3. Mind-mapped image of the intermediary company Gas Project Development Central Asia AG. Source: The Authors. Overgas. Lithuania and Poland had the EU review their gas contracts with Russia, and Lithuania sued Gazprom in 2012 for overcharging a local gas company (OSW 2012). That said, Gazprom continues to use intermediaries to create complexity and profit opportunities, such as Gas Project Development Central Asia AG (GPD), which develops and finances natural gas extraction projects in Central Asia (Heinrich 2008). Figure 3 shows its complex ownership structure. GPD is a joint venture (split 50/50) between Gazprom Germania and Centrex Energy and Gas. Since Centrex is itself a subsidiary of Gazprombank, GPD is a wholly owned subsidiary of Gazprom through several corporate layers. According to the Centrex website, GPD is currently involved in only three projects, all in Uzbekistan, and has made Uzbek natural gas executive Bakhtiyor Fazilov its CEO. Another joint venture of Centrex (one-third ownership) and Gazprom Germania (two-thirds ownership) is ZMB Gasspeicher Holding GmbH, a shell corporation for shareholdings in gas production companies, directed by Gazprom Germania executive Detlef Weidemann. Gasspeicher is registered in Austria, which is universally recognized as a secrecy jurisdiction, making it an offshore company. One of the companies in which Gasspeicher invests is Saltfleetby UGS, an underground gas storage facility in Lincolnshire, England. The facility is owned by Wingas Storage UK, a subsidiary company of Wingas, a German company which itself is a joint venture between Gazprom Germania and Wintershall Holding AG, a subsidiary of BASF. What could have been straightforward co-ownership of an underground gas facility by two gas companies instead has two extra layers that seem to exist merely to create extra company stock. Despite Gazprom’s current straitened position, its appetite for creating intermediaries has hardly waned. Conclusion We conclude that there were several purposes for Russia and Central Asia in using intermediary gas companies, from navigating trade among the newly independent states, to stripping assets, monopolizing markets, and obfuscating finance and ownership. Intermediary companies did serve useful purposes, particularly in the first phase of post–Cold War–era gas trade, when Itera overcame challenges to indebted post-Soviet republics. Intermediaries may have also initially sorted out the business of gas swaps in Central Asia. However, the favourable positions of state-owned companies with respect to intermediaries led to lost revenue in selling off Soviet assets, curbed Gazprom’s competitors from entering the market, and resulted in capital flight. As Cooley (2012) describes, the local rules in Central Asian states were at play, and they undermined the state. The intermediaries’ usefulness may have expired by the third phase, as a result of increased competition among suppliers to Europe, diversification of export routes to Asia and Downloaded by [University of Kentucky], [Charles Dainoff] at 13:03 19 February 2015 14 S. Closson and C. Dainoff the Middle East, and the economic stagnation in Eurasia, which resulted in exporters’ and importers’ calling for new oversight of the gas trade. When gas prices were high in the 2000s and Russia retained the monopoly on Central Asian gas and on European exports, government policies against offshoring were nonexistent. In fact, the Russian translation for ‘tax regimes’ is ‘special tax zones’, implying eased tax regimes or tax incentives for capital (Palan, Murphy, and Chavagneux 2010, 2). However, a combination of the global financial crisis, a slow Russian recovery, and declining oil prices could spell the end of offshore-registered intermediary gas trading companies. As Europe tightens its anti-monopoly laws, while at the same time importing less Russian gas (in favour of cheaper globally traded liquefied gas), and as Central Asian states find more alternative export routes, Russia may no longer be able or willing to support such trading arrangements. Finally, the movement towards de-offshoring gained support in Russia and Kazakhstan after the 2008 financial crisis. Newly proposed laws were meant to force companies to come onshore or be excluded from state procurement bids and privatization proceedings. It is unclear how the financial sanctions against Russia by the West, after its annexation of Crimea in 2014, will affect efforts to curb the use of offshore zones. Notes 1. This section is in part a synopsis of Closson (2009). 2. ‘Bearer debt’ refers to bonds or other securities that can be bought or sold without exchange of formal ownership. That is, the securities belong to whoever ‘bears’ them. The legality of bearer debt is an indicator to regulators of a country’s lax attitude towards money laundering. References Aslaksen, S. 2010. “Oil and Democracy: More than a Cross-country Correlation?” Journal of Peace Research 47 (4): 421–431. doi:10.1177/0022343310368348 Armenpress News Agency. 2013. “Voting for Armenian-Russian ‘Gas’ Agreements to Hold on December 23.” December 20, 2013. Baciulis, A. 2011. “Has Gazprom Launched War Against Lithuania?” Veidas weekly magazine, February 11, 2011Lithuania. Balmaceda, M. 2008. “Corruption, Intermediary Companies, and Energy Security: Lithuania’s Lessons for Central and Eastern Europe.” Problems of Post Communism 55: 16–28. doi:10.2753/PPC10758216550402 Boston Consulting Group, 2011. Global Wealth 2011: Shaping a New Tomorrow 13. http://www.bcg.com/ pl/documents/file77766.pdf Bremmer, I., and C. Welt. 1997. “Armenia’s New Autocrats.” Journal of Democracy 8: 77–91. doi:10.1353/ jod.1997.0036 Buck, A. 2007. “Elite Networks and Worldviews During the Yeltsin Years.” Europe-Asia Studies 59: 643– 661. doi:10.1080/09668130701291873 Cheloukhine, S., and J. King. 2007. “Corruption Network as a Sphere of Investment Activities in Modern Russia.” Communist and Post-Communist Studies 40: 107–122. doi:10.1016/j.postcomstud.2006. 12.005 Clark, I. 1999. Globalization and International Relations Theory. Oxford: Oxford University Press. Closson, S. 2009. “State Weakness in Perspective: Strong Politico-Economic Networks in Georgia’s Energy Sector.” Europe-Asia Studies 61: 759–778. doi:10.1080/09668130902904910 Closson, S. 2013. “Subsidies in Russia’s Gas Trade.” In Russian Energy and Security, edited by S. Oxenstierna and V. Tynkkynen, 104–133. London: Routledge. Cobb, S. C. 2001. “Globalization in a Small Island Context: Creating and Marketing Competitive Advantage for Offshore Financial Services.” Georgrafiska. Annaler 83 B: 161–174. doi:10.1111/j.0435-3684. 2001.00104.x Collier, P. 2007. The Bottom Billion: Why the Poorest Countries are Failing and What can be Done about it. New York: Oxford University Press. Downloaded by [University of Kentucky], [Charles Dainoff] at 13:03 19 February 2015 Central Asian Survey 15 Collier, P., and J. W. Gunning. 1999. Trade Shocks in Developing Countries. New York: Oxford University Press. Collins, K. 2005. “The Logic of Clan Politics: Evidence from the Central Asian Trajectories.” World Politics 56: 176–190. Collins, K. 2006. Politics and Regime Transition in Central Asia. Cambridge: Cambridge University Press. Collins, K. March 2009. “Economic and Security Regionalism among Patrimonial Authoritarian Regimes: The Case of Central Asia.” Europe-Asia Studies 61: 249–281. doi:10.1080/09668130802630854 Cooley, A. 2012. Great Games, Local Rules: The New Great Power Context for Central Asia. Oxford: Oxford University Press. Credit Suisse Research Institute. 2011. “Global Wealth Report.” Cummings, S. 2005. Kazakhstan: Power and the Elite. London: I.B. Tauris. Franke, A., A. Gawrich, and G. Alakbarov. 2009. “Kazakhstan and Azerbaijan as Post-Soviet Rentier States: Resource Incomes and Autocracy as a Double ‘Curse’ in Post-Soviet Regimes.” Europe-Asia Studies 61: 109–140. doi:10.1080/09668130802532977 Global Financial Integrity. 2013. “Global Illicit Financial Flows Report 2013.” http://www.gfintegrity.org/ reports/ Global Witness: “It’s a Gas: Funny Business in the Turkmen-Ukraine Gas Trade.” Global Witness, April 2006. http://www.globalwitness.org/sites/default/files/pdfs/its_a_gas_april_2006_lowres.pdf Goldberg, E., E. Wibbels, and E. Myukiyehe. 2008. “Lessons from Strange Cases: Democracy, Development, and the Resource Curse in the U.S. States.” Comparative Political Studies 41: 477– 514. doi:10.1177/0010414007313123 Grinberg, I. 2012. “The Battle Over Taxing Offshore Accounts.” UCLA Law Review, 204. Haiduk, K. 2007. “The Political Economy of Post-Soviet Offshorization.” In After Deregulations: Global Finance in the New Century, edited by L. Assassi, D. Wigan, and A. Nesvetailova, 250–267. London: Palgrave. Heinrich, A. 2008. “Gazprom’s Expansion Strategy in Europe and the Liberalization of EU Energy Markets.” Russian Analytical Digest, February 5, 2008. Henry, James S. 2012. “The Price of Offshore Revisited.” Tax Justice Network, July. Holsti, K. 1996. The State, War, and the State of War. Cambridge: Cambridge University Press. Hughes, J., P. John, and G. Sasse. 2002. “From Plan to Network: Urban Elites and the Postcommunist Organizational State in Russia.” European Journal of Political Research 41: 395–420. doi:10. 1111/1475-6765.00017 Ilkhamov, A. 2007. “Neopatrimonialism in Uzbekistan: Interest groups, Patronage Networks and Impasses of the Governance System.” Central; Asian Survey March 26: 65–84. doi:10.1080/ 02634930701423491 Irish, C. R. 1982. “Tax Havens.” Vanderbilt Journal of Transnational Law 15: 449–509. Jensen, N., and L. Wanchekon. 2004. “Resource Wealth and Political Regimes in Africa.” Comparative Political Studies 37: 816–841. doi:10.1177/0010414004266867 Jervalidze, L. 2006. “Georgia: Russian Foreign Energy Policy and Implications for Georgia’s Energy Security.” In Global Market Briefings, edited by GMB Publishing Ltd. London: Institute for Analysis of Global Security and The Rosner Group. Jones Luong, P. 2002. Institutional Change and Political Continuity in Post-Soviet Central Asia: Power, Perceptions, and Pacts. Cambridge: Cambridge University Press. Jonson, L. 1998. Russia and Central Asia: A New Web of Relations. London: Royal Institute of International Affairs. Kalotay, K. 2012. “Indirect FDI.” The Journal of World Investment and Trade 13 (4): 542–555. doi:10.1163/ 221190012X649841 Kalyuzhnova, Y., A. M. Kutan, and T. Yigit. 2009. “Corruption and Economic Development in Energy-Rich Economies.” Comparative Economic Studies 51 (2): 165–180. doi:10.1057/ces.2008.46 Khrystanovskaya, O., and S. White. 1996. “From Soviet Nomenklatura to Russian Elite.” Europe-Asia Studies 48: 711–733. doi:10.1080/09668139608412377 Kirkow, P., P. Hanson, and A. Treivish. 1998. “Networks, Linkages and Legacies: Evidence from an Elite Survey in Six Russian Provinces in 1996–1997.” Communist Economics & Economic Transformation 10: 405–413. doi:10.1080/14631379808427929 Kleiner, V. 2004. “Russian Fund Campaigns Against Gazprom.” The Deal, June 21, 2004. Koroliuk, T. D., and D. Y. Rudenko. 2014. “Russian Multinationals FDI Outflows Geography: The Emerging Dominance of Greater Europe.” European Researcher 67 (1–2): 130–135. Downloaded by [University of Kentucky], [Charles Dainoff] at 13:03 19 February 2015 16 S. Closson and C. Dainoff Kurkchiyan, M. 2000. “The Transformation of the Second Economy into the Informal Economy.” In Economic Crime in Russia, edited by Alena Ledeneva, and Marina Kurkchiyan, 83–98. The Hague & London: Kluwer Law International. Ledeneva, A. 1998. Russia’s Economy of Favours: Blat, Networking, and Informal Exchanges. New York: Cambridge University Press. Ledeneva, A. 2004. “Blat Lessons: Networks, Institutions, Unwritten Rules.” In The Legacy of the Soviet Union, edited by W. Slater and A. Wilson, 122–143. New York: Palgrave Macmillan. Leite, C., and J. Weidman. 1999. “Does Mother Nature Corrupt?” IMF Working Paper 99/85, July. Linz, J., and A. Stepan. 1996. Problems of Democratic Transition and Consolidation: Southern Europe, South America, and Post-Communist Europe. Baltimore: Johns Hopkins University Press. Loskot-Strakota, A. 2009. “Gazprom’s Expansion in the EU: Co-Operation or Domination?” OSW Report. Mazneva, Y., I. Reznik, and M. Tovkailo. 2010. “Gazprom Middlemen Face Audit on Exports.” The Moscow Times, March 5, 2010. Mirimanova, N. 2006. “Corruption and Conflict in the South Caucasus.” In Understanding Conflict. Building Peace, edited by D. Klein. London: International Alert. Noinvite.com. 2010. “Gazprom will Keep Controversial Intermediaries as Strategic.” Sofia News Agency. December 28, 2010. Organization for Economic Cooperation and Development. 2007. “Tax Cooperation: Towards a Level Playing Field.” Assessment by the Global Forum on Taxation. Olcott, M. B. 2007. KAZMUNAIGAZ: Kazakhstan’s National Oil and Gas Company, the James A. Baker III Institute for Public Policy. http://carnegieendowment.org/files/Kaz_Olcott.pdf. OSW. 2012. ‘Lithuania is Suing Gazprom’, Center for European Studies. October 10 2012. http://www.osw. waw.pl/en/publikacje/eastweek/2012-10-10/lithuania-suing-gazprom Palan, R., R. Murphy, and C. Chavagneux. 2010. Tax Havens: How Globalization Really Works. New York: Cornell University Press. Papaioannou, E., and G. Siourounis. 2008. “Economic and Social Factors Driving the Third Wave of Democratization.” Journal of Comparative Economics 36: 365–387. doi:10.1016/j.jce.2008.04.005 van der Ploeg, F., and S. Poelhekke. 2009. “Volatility in the Natural Resource Curse.” Oxford Economic Papers 61 (4): 727–760. doi:10.1093/oep/gpp027 Prime-Tass, 2010. “Gazprom to Remove Intermediaries in Gas Export Supplies.” Prime-Tass, 4 March 2010. Riley, A., and F. Umbach. 2007. “Out of Gas: Looming Russian Gas Deficits Demand Readjustment of European Energy Policy.” German Council on Foreign Relations. https://ip-journal.dgap.org/en/ipjournal/topics/out-gas Rose, A. K., and M. M. Spiegel. 2007. “Offshore Financial Centres: Parasites or Symbionts?” The Economic Journal 117 (523): 1310–1335. doi:10.1111/j.1468-0297.2007.02084.x Ross, M. L. 2009. Oil and Democracy Revisited. Los Angeles: UCLA Press. Ross, M. L. 2012. The Oil Curse: How Petroleum Wealth Shapes the Development of Nations. Princeton: Princeton University Press. Russia and CIS Oil and Gas Weekly. 2010. October 21. Russian Financial Control Monitor. 2007. “Gazprom to Buy Assets of Swiss Zeromax in Uzbekistan.” February 2, 2007. Russian Financial Control Monitor. 2009. “Gazprom to Gain Foothold in Turkey.” August 20, 2009. Russian Financial Control Monitor. 2011. “Gazprom Consolidates Austrian Gas Trader.” April 20, 2011. Russian Oil and Gas Report. 2009. “Gazprom bought a 4.45% Stake in ArmRosGazprom.” April 1, 2009. Sandbakken, C. 2006. “The Limits to Democracy Posed by Oil Rentier States.” Democratization 13 (1): 135–152. doi:10.1080/13510340500378464 Schatz, E. 2004. Modern Clan Politics: The Power of "Blood" in Kazakhstan and Beyond. Seattle: University of Washington. Schmitz, Aat. 2003. “Elite Change and Political Dynamics in Kazakhstan.” Orient/Jg. 44/2003/Heft 4/S.579600. Sharman, J. 2010. “Offshore and the New International Political Economy.” Review of International Political Economy 17 (1): 1–19. doi:10.1080/09692290802686940 Smith, B. 2004. “Oil Wealth and Regime Survival in the Developing World, 1960-1999.” American Journal of Political Science 48 (2): 232–246. doi:10.1111/j.0092-5853.2004.00067.x Smith, B. 2007. Hard Times in the Land of Plenty: Oil Politics in Iran and Indonesia. Ithaca: Cornell University Press. Smith, S., K. Booth, and M. Zalewski. 1996. International Theory: Positivism and Beyond. Cambridge: Cambridge University Press. Downloaded by [University of Kentucky], [Charles Dainoff] at 13:03 19 February 2015 Central Asian Survey 17 Stern, J. 2005. The Future of Russian Gas and Gazprom. Oxford: Oxford University Press. Van Fossen, A. 2003. “Money Laundering, Global Financial Instability, and Tax Havens in the Pacific Islands.” Cotemporary Pacific 15 (2): 237–275. doi:10.1353/cp.2003.0058 Wantchekon, L. 2002. “Why Do Resource Dependent Countries Have Authoritarian Governments?” Journal of African Finance and Economic Development 2: 57–77. Weaver, C. 2013. “Rosneft Gains Control of Itera.” Financial Times. http://www.ft.com Wedel, J. 2003. “Clans, Cliques, and Captured States: Rethinking Transition in Central and Eastern Europe and the Former Soviet Union.” Journal of International Development 15: 427–440. doi:10.1002/jid. 994 Wocjik, D. 2012. “Where Governance Fails: Advanced Business Services and the Offshore World.” Progress in Human Geography 37 (3): 330–347. Yenikeyeff, S. M. 2008. Kazakhstan’s Gas: Exports Markets and Export Routes. Oxford: Oxford Institute for Energy Studies. http://www.oxfordenergy.org/wpcms/wp-content/uploads/2010/11/NG25KazakhstansgasExportMarketsandExportRoutes-ShamilYenikeyeff-2008.pdf Zhixiang, S. 2008. Offshore Financial Havens: Their Role in International Capital Flows. Singapore Management University, UMI Publishing.