Peculiarities of the Media in Putin’s Russia. Gazprom Oil Concern’s Role as a Media Giant

Research Paper (postgraduate), 2016

21 Pages, Grade: 100

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Peculiarities of the Media in Putin’s Russia:
Gazprom Oil Concern’s Role as a Media Giant
Joshua Cunningham

University of Tennessee


The purpose of this research is to provide an assessment of the effectiveness of media outlets that have been purchased by Gazprom specifically during kremlin control of the company. This assessment will be performed using Boris Grushin’s (1979) formula of media effectiveness measurement. The goal is to illustrate the peculiarities that make pro-state messaging effective in Russia and to project future obstacles said effectiveness presents for nations seeking to curb Russian media influence. This research is founded in content analysis that provides insight into how and why Russia’s largest oil company became its largest media stakeholder, how Gazprom’s ownership of outlets has changed the Russian media landscape, and the threat that Russia’s corporate-owned media outlets pose to democratic nations.

Thesis: The kremlin-backed transformation of Gazprom into Russia’s largest media holding fosters greater media effectiveness for pro-regime messaging while creating concern for countries seeking to curb Russian influence.

Peculiarities of the Media in Putin’s Russia: Gazprom Oil Concern’s Role as a Media Giant

The rise of Putin’s presidency and the transformation of Gazprom Energy into Russia’s largest media holding is not without correlation. Among the many peculiarities that exist in modern day Russia that consequently make it difficult to label as a textbook-defined authoritarian regime is the Kremlin’s domination of joint-stock companies. The companies, such as Gazprom, are used not only revenue generators for the state, but as buyers of Russia’s media outlets (Rosner, 2006). Such action has ensured positive kremlin coverage through media outlets claiming independence from state influence that are nonetheless manipulated by the state indirectly through Gazprom and its subsidiaries.

Gazprom Ownership

Once named the world’s most profitable company (Dickson, Kwanten, and Magomaeva 2014), Gazprom’s origins lie in the economic strength, or lack thereof, of the late USSR. From its communist roots as the Soviet Ministry of Gas Industry, the energy giant, Gazprom, has remained in state majority control even after its inception as a joint stock company in 1998 (“Equity Capital Structure,” n.d.). Though much of the corporation’s growth since the breakup of the USSR can be attributed to careful manipulation and exportation of Russia’s natural gas supply, Gazprom has grown laterally across business sectors having acquired over 30 daughter companies by 2014 (Dickson, Kwanten, and Magomaeva 2014).

Gazprom’s rise as a state-owned and multi-disciplinary economic juggernaut can be accredited to President Vladimir Putin’s efforts to increase the level of state ownership of the company and to use the majority stockholder share to reorganize Gazprom’s executive board (Goldman, 2008). While state ownership of Gazprom dropped to 38% of total company shares under the Yeltsin Presidency, Putin encouraged an increase of state stock holdings of Gazprom placing state ownership of the company at over 50% (“Gazprom Shares”, 2016). The state control of Gazprom allowed Putin replace high level decision makers within the company with new committee members who were from St. Petersburg, had close ties to President Putin, or both (Stern, 2005). In May 2001 Putin ousted Gazprom CEO, Rem Viakhirev, as well as former Prime Minister Viktor Chernomyrdin, who was serving as chairman (Goldman, 2008). Less than four years after the executive board restructuring, most of the former Gazprom management had been retired or replaced (Stern, 2005). By May 2005, three out of nineteen total committee members remained from the previous administration (Stern, 2005).

Viakhirev was replaced with Dmitry Medvedev, a man who before becoming Russia’s president, would “.. .use the gas giant's increasing economic power to extend the Kremlin interests far beyond the energy sector. For example, Gazprom bought out several independent media outlets, transforming them into Kremlin mouthpieces,” (Yasmann & Jensen, 2008).

Within months of his appointment as Gazprom’s president, Medvedev began exploring opportunities to expand the company’s holdings into the media sector by heading a meeting with an investment consortium attended by U.S. media mogul, Ted Turner (Yasmann & Jensen, 2008).

Medvedev’s efforts in the early 2000s mark only the beginning of Gazprom’s journey to become Russia’s largest media holding company (Moscow Times, 2013). Had Putin not committed to the return of Gazprom to state control, it is unlikely that executives of the company would have agreed to delve so deeply into the buying of media holdings as the company was not simply expanding its business by buying up successful, money generating media outlets (Rosner, 2006). Many experts in the Moscow investment community objected to this acquirement of non- performing downstream assets such as Izvestia, a loss-making newspaper (Rosner, 2006). Gazprom currently owns a portion of Channel One (formerly known as Public Russia Television) through its investments in National Media Group (Dziadul, 2016). The former owner of Channel one suggests that the buyout of the channel was politically motivated rather than economic as he himself, “never got financial profits from ORT... Political profits were endless, economic—none,” (Khvostunova, 2006).

Though Alfred Kokh, head of Gazprom Media in 2001, would state that the takeover of NTV was “purely economic,” (Kokh, 2001) such claims were disputed by critics who asserted that the buyout would, “cost Gazprom millions of dollars a year,” (Burrett, 2011). One year after Gazprom’s acquiring of NTV, the Gazprom-Media subsidiary was reported to have debts totaling $372 million with only a single company of the entirety of holdings operating at a profit (Vedomosti, 2001). These buyouts of media holdings would be accredited by many to the idea that such holdings provided political capital rather than “a commercial transaction rationalized by the need to exercise capital for pure commercial gain,” (Rosner, 2006).

While state-ownership of fossil fuel producers is not unique to Russia, the buying out of media holdings by oil companies is not something observed in American companies such as ExxonMobile (Securities and Exchange Commission, 2010). With the Russian government owning more than 50% of Gazprom’s stockholder shares, and the use of that power to replace high level executives as well as to gain stockholder majority of non-performing media holdings, it can be inferred that Gazprom is being used to create political capital through media control. Such ideas were echoed within the words of Putin himself during a 2013 news conference where he stated, “there should be patriotically minded people at the head of state information resources.

People who uphold the interests of the Russian Federation. These are state resources. That is the way it is going to be,” (Dougherty, 2015).

Research Methods

Summative content analysis was utilized in providing insight as to how Gazprom operates as a major media holder, the effects that their ownership has on formerly independent news outlets, and the threat that it poses to democratic nations. Direct quotes from Russian journalists, media analysts, and owners of mass media within the country are presented to verify changes that have taken place since the early 2000s within the mass media outlets of Russia. The effectiveness of Russian mass media outlets under Gazprom’s control have been measured using Boris Grushin’s proposed formula of media effectiveness measurement (1979).

Media Message Change Under Gazprom Control

Journalists have noted that during the transition from private ownership of media institutions to state control through companies such as Gazprom, “political discourse in Russia deteriorated, and the public debate in the media was either substituted by the imitative forms or squeezed out from the popular media outlets, such as television and dailies with large circulation, to the publications with much smaller readership, like Novaya Gazeta, or to the internet” (Khvostunova, 2013). The use of Kremlin-backed joint stock companies such as Gazprom provided understanding between the business and political elite in that, “both see media first of all as weapons to gain political capital - a vital resource that later can be converted into all other forms of capital outside the media domain,” (Koltsova, 2005).

As of 2016, Gazprom owns 32 media holdings comprised of, “television, radio, printing press, cinema production, advertising, movie theaters and internet assets,” (About the Company, n.d.). These holdings have targeted both new businesses in Russia as well as well-respected media institutions such as Izvestia. Upon the buyout of Izvestia, the Moscow Times reported that, “several analysts said that the deal was politically motivated and predicted that Izvestia, which has remained largely unbiased in its political coverage, would tone down any criticism of the Kremlin and become increasingly loyal to President Vladimir Putin,” (Medetsky, 2015).

Once considered, “one of the country's largest and most respected national newspapers,” (Medetsky, 2005) Gazprom succeeded in taking control of Izvestia and, “transforming it from a respected and balanced publication to a tabloid newspaper,” (Nee, 2012). Anna Kachkayeva, a media analyst with Radio Free Europe, adds, "I assume that it [Gazprom] could well have a sluggish, inactive and unformulated attitude toward this quite successful publication. It will have less influence; it will be accommodating toward the authorities, and quiet," (Medetsky, 2005).

The maneuvers Gazprom employs to gain media control have been as varied as their media holdings themselves. While many buyouts have taken the form of years long legal processes, as was the case with RuTube (Schonfield, 2008), the most infamous cases of Gazprom takeover have been immediate and forceful. Most evident of Gazprom’s ability to acquire media holdings outside of solely economic means was the takeover Russia’s only nationwide independent television network, NTV (Ingram, 2001).

After months of legal battles, on April 13 th, 2001, armed guards stormed NTV studios alongside Gazprom officials (Burrett, 2011). Shots were fired during the raid and the stations owner, Vladimir Gusinsky, fled the country. Gusinsky later stated, “I fully understand the game I'm in. ...The state's goal is to control us, to change us, to destroy us,” (Higgins, 2001). NTV Director General Evgeny Kiselyov suspected that the entirety of the Gazprom takeover of NTV had been planned by Putin himself, stating, “The masks have been taken off, the authorities, unable to strangle NTV by legitimate means, have decided to ignore the law and launch a frontal assault - arrests, searches, seizure of documents. I think that the main players here are not [Gazprom-Media Chief] Kokh, Gazprom, or even the Prosecutor’s Office. After all, [Prosecutor General] Ustinov, [Deputy Prosecutor General] Kolmagorov and those with them are just puppets. It is President Putin who is the puppeteer,” (Kiselyov, 2001). Opposition politician Boris Nemtsov echoed such insights claiming that the Kremlin sought to turn NTV into a propaganda machine, like Russia's other two state-run TV networks (Nemtsov, 2003).

Though analysts perceived that Gazprom was uninterested in the day-to-day operations of NTV, this quickly changed after President Putin’s election (Burrett, 2011). NTV’s scriptwriters and producers such as renowned satirist, Victor Shenderovich, were asked to remove negative coverage of President Putin from NTV’s broadcasting (Shenderovich, 2003). Ousted NTV leaders responded by penning an open letter requesting that any further management or editorial changes be placed on a three-month moratorium. Gazprom rejected this proposal (Ingram, 2001).

In the well-publicized battle between the kremlin and former NTV owner, Vladimir Gusinsky, the Russian populace sided with President Putin. A January 2000 public opinion poll conducted by VCIOM found that 75% of Russians agreed that “order is more important than democracy and should be pursued even if in entails violations of democratic procedures and abridgements of personal freedoms,” (Burrett, 2011).

Russian propaganda specialist Peter Pomerantsev states that, “the president and government receive mainly positive or neutral coverage from Kremlin-controlled channels, while opposition members are covered only rarely and usually negatively (Pomerantsev, 2015).

Consistent with his Pomerantsev’s assertion, control of NTV served to minimize opposition coverage during subsequent elections. In 2008, President Putin received 54% of political coverage among candidates while Dmitry Medvedev, Putin appointee and head of Gazprom, received 43%. Less than 6% of 2008 presidential candidate coverage was provided by NTV (Burrett, 2011). This level of establishment news coverage on NTV contrasts with the 2000 elections in which no candidate, including Putin, received more than 30% of coverage on the channel (Burrett, 2011).

NTV was not alone in its absorption into Gazprom or its subsequent message change, as by the late 2000s the majority of television stations had fallen under state control. According to the Moscow Times, “Critics say television has become a staple of the regime, translating the Kremlin's stance to the populace — 80 percent of whom use television as their primary source of information on politics,” (Bratersky, 2011).

Abbildung in dieser Leseprobe nicht enthalten

Table 1 Adapted from: Burrett, T. (2011). Television and presidential power in Putin's Russia. London: Routledge.

In augmentation to the reach that television has within Russia, Gazprom has expanded its media holdings into radio broadcasting. Moscow-based Newsweek journalist, Anna Nemtsova, states that, “For years, if you asked politicians whether Russia had freedom of speech, they’d cite Echo of Moscow” (Nemtsova, 2014). Considered Russia’s most popular independent radio station and one of the few remaining voices critical of Putin, the station has undergone controversial layoffs and policy change since being absorbed by Gazprom under kremlin orders in 2005 (Felgenhauer, 2014). Former board Echo Moscow board member and editor-in-chief made claims after the firing of one of his program hosts by Gapzrom board members, “This war is being fought on all fields, starting in the Ministry of Natural Resources and ending with the prosecutors,” (Nemtsova, 2014). Editor-in-Chief of Echo Moscow, Alexei Venediktov, claimed that the buyout of the station was "an attempt to correct editorial policy," and that rather than being sourced from Gazprom itself, instead the buyout came from the "highest echelons of the political establishment," (Bidder, 2012).

Not unlike the exodus of employees that took place after Gazprom’s buyout of NTV, “journalists have quit Ekho Moskvy this year citing an increasing atmosphere of pressure from the Kremlin to rein in controversial articles and not provide a platform for opposition to speak out,” (Fitzpatrick, 2015). A 2015 Echo Moscow board decision, spearheaded by Gazprom officials, requested a controversial loan from shareholders. Upon being asked if he believed that Echo Moscow was being pushed into the direction of bankruptcy, Editor-in-Chief Alexei Venediktov responded, “In my opinion, yes. And deliberately,” (Fitzpatrick, 2015). Though the minority of shareholders were able to delay the decision to accept shareholder loans, Echo Moscow has nonetheless run at a loss since 2014 (Fitzpatrick, 2015). As the station had been, “run at a profit for some years until 2014,” the current financial troubles of Echo Moscow were have said to of started when, “Gazprom-Media Holding removed Yury Fedutinov, who had been manager for 22 years and put in his place Yekaterina Pavlova, a protégé of the president’s press service, and wife of one of the deputies of Dmitry Peskov, administration spokesman,” (Fitzpatrick, 2015).

Media Effectiveness Under Gazprom

While state-ownership of fossil fuel producers is not unique to Russia, the buying out of media holdings by oil companies is not observed in American companies such as ExxonMobile (Securities and Exchange Commission, 2010). With the Russian state owning more than 50% of Gazprom’s stockholder shares, and the use of that power to replace high level executives as well as to gain stockholder majority of non-performing media holdings, it has been assessed that Gazprom is being used to create political capital through media control. More specifically, media outlets under Gazprom control are hypothesized to have greatly contributed to Putin’s public approval ratings (Nardelli, Rankin, and Arnett, 2015).

Abbildung in dieser Leseprobe nicht enthalten

Table 2 A cross-section of Russia's most circulated newspapers

While the immense reach of Gazprom’s media holdings is undeniable, the use of Boris Grushin’s proposed formula of media effectiveness measurement allows for a greater understanding of the level of media effectiveness of outlets under Gazprom control. In this context, media effectiveness is defined as, “the degree to which the set target is reached, controlling for consumption of time and resources,” (Grushin, 1979). As information on newspaper circulation is readily available, Grushin’s formula will be used primarily to measure effectiveness within those media institutions.

Gazprom has served as owners, either directly or indirectly, of three of the largest newspapers in Russia - Izvestia, Kommersant, and Tribuna. The approximated media reach of these three newspapers according to self-reporting is 442,605. The buyout price of Izvestia, the largest of the publications being measured, by media publishers polled by Vedomosti was between 10-20 million US dollars (Medetsky, 2005). For the purposes of completing Grushin’s equation, it is assumed that the price of both Kommersant and Tribuna was within similar range. With this assumption, the total estimated cost to Gazprom to gain control of Tribuna, Kommersant, and Izvestia is between 30 and 60 million US dollars. Employees of these three newspapers are assumed to account for a percentage of the $1.5 billion in salaries reported to be paid in 2004 to 120,000 Gazprom staff working in noncore businesses (Medetsky, 2005), out of the total $161 billion dollars of revenue earned by the company within the same year (2004 Annual Report, 2005).

Abbildung in dieser Leseprobe nicht enthalten

Table 3 Timeline of kremlin supported newspaper purchases and Putin approval ratings

Putin’s approval according to a 1999 Levada Center public opinion poll registered at 31% (Putin’s rating: anomaly or pattern?, 2015). By 2005, Putin’s popularity charted as a record high among all world leaders with the Levada Center reporting 89% approval ratings (Nardelli, Rankin, and Arnett, 2015). Consistent with previous examples of Gazprom takeovers, “one explanation for Putin’s consistently high approval ratings is the state’s dominance of the media and how it shapes Russian public opinion, ” (Nardelli, Rankin, and Arnett, 2015).

Abbildung in dieser Leseprobe nicht enthalten

By placing information surrounding Gazprom’s purchase of Izvestia,Kommersant and Tribuna into Grushin’s proposed model of media effectiveness, an interpretation of media effectiveness under Gazprom control is presented. Even if newspaper coverage accounts for a small increase in Putin support, the cost to ensure media control through Gazprom is only a fraction of the company’s and kremlin’s total resources.

Abbildung in dieser Leseprobe nicht enthalten

Table 4 Grushin's proposedfontmla of media effectiveness and Gazprom's purchase of Izvestia, Kommersant, and Tribuna

Russia’s Media Effectiveness and the United States

A high level of Russian media effectiveness is among several catalysts for the proposed 2016 Countering Foreign Propaganda and Disinformation Act. The sponsors of the congressional bill claim that it is, “aimed at countering propaganda from Russia, China and other countries,” (US Senators Call to Counter Russian, Chinese Propaganda, 2015). In defense of the act, Republican Representative Edward Royce states, “it’s remarkable to see the sophisticated media offense that Putin is conducting across Eastern Europe, Central Europe, the Middle East and Latin America through RT (a state-run television outlet). We’re just not countering it effectively,” (Taylor, 2015). In regards to Russia’s media influence outside of the United States, assistant secretary of state for European and Eurasian affairs, Victoria Nuland, told the proposed bills committee that she and other American diplomats were scrambling to “harden European resilience” to the “Kremlin’s pervasive propaganda campaign [that is] poisoning minds across Russia, on Russia’s periphery and across Europe,” (Taylor, 2015).

Jeff Shell, chairman of the Broadcasting Board of Governors, claims that, states that U.S. government’s international media operations grossly lack funding to counter effectively the rising global blitz of state-sponsored propaganda from Russia,” (Taylor, 2016). Shell states, “There’s no question we’re badly underfunded and don’t have enough money to compete with our adversaries,” (Taylor, 2016).

Financing for the countering propaganda alone is not enough according to the Washington Times, “although Moscow’s funding for RT, estimated at roughly $307 million annually, is lower than what Washington spends on the Broadcasting Board of Governors, the Russian operation is more focused and efficient, many analysts say,” (Taylor, 2016). Representative Royce recognizes that, “If we have limited taxpayer funds, we should be much more focused on influencing people than rough audience numbers,” (Taylor, 2016). It is proposed that further analysis of both media effectiveness, as well as reach, within Russia and the United States both will provide for greater insight in the creation of tools used to counter foreign influence.


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Peculiarities of the Media in Putin’s Russia. Gazprom Oil Concern’s Role as a Media Giant
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