Where state capitalism meets the transnational capitalist state: The ties between Gazprom and Amsterdam’s offshore financial center

ABSTRACT

Bringing the literature on state-owned enterprises (SOEs) and state capitalism in conversation with studies on offshore financial centers (OFCs), this paper dissects the post-2000 internationalization of Russian SOE Gazprom via the OFC of Amsterdam, the Netherlands. Not adhering to the conventional financial logics of private firms, nor exclusively following political orders of the Kremlin, Gazprom is one of the exemplary state-capital hybrids of the new state capitalism. Where Gazprom steadily increased Russia’s geopolitical leverage over Europe’s energy needs prior to the 2022 military invasion of Ukraine, we stress that “it takes two to tango”, as the internationalization of Gazprom could not have occurred without active and passive help of capitalist states elsewhere. We argue that the Netherlands functions as a transnational capitalist state in the service of foreign capital, including state capital, with Amsterdam’s corporate services providers having long provided the legal stepping stones and corporate respectability enabling Gazprom to expand internationally. In this sense, the prevalent “othering” of SOEs and state capital neglects how the global ascent of state capitalism could not have happened without dedicated assistance orchestrated in leading Western OFCs.

KEYWORDS:

• Amsterdam
• Gazprom
• neoliberalism
• offshore finance
• Russia
• state-owned enterprises
• state capitalism

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. SOEs are a traditional characteristic of the fossil fuel sector (Clifton and Díaz Fuentes 2022), besides oil including natural gas, which is essential to industry and households alike, and is delivered through infrastructures deemed of critical importance by many states. Especially in emerging economies, fossil energy SOEs “are among the largest in their global industries” (Babic 2023, 30). Gazprom, needless to say, is a case in point. In advanced economies, meanwhile, many states continue to play a variegated-but-active role in the energy sector – including the Netherlands.

2. The historical development of the Dutch OFC is traced back to Dutch multinationals like Shell and their operations in the Caribbean (Het Belastingparadijs).

3. Financially, the Russian state thus first and foremost benefits by levying various taxes on Gazprom rather than by receiving dividends (see Pletnev 2020).

4. Gazprom stock, issued via American Deposit Receipts (ADRs) in London and New York, have become popular since: in 2011, 28.35% was owned by ADR holders, falling to 19.7% by 2019 (Gazprom 2016, 9; 2020, 8).

5. Pirani (2010, 67) reports that under prime minister Viktor Chernomyrdin’s government in the 1990s, “the state’s 38% share in Gazprom had been transferred to [Gazprom executive Rem] Vyakhirev in trust, and people in the Kremlin feared the state might never get it back” when Vyakhirev joined the opposition. In 1999, such breakaway ambitions found an end with the incoming Putin government.

6. In this respect, Gazprom draws on a long legacy going back to Soviet times, where state-controlled export revenues were already kept in offshore accounts (Cassis 2006, 220).

7. Between 2000 and 2019, Gazprom disbursed 14.2% of total net income to shareholders in dividends, much less than its Western peers BP (54.9%), TotalEnergies (45.5%) or ExxonMobil (35.0%). It also issued more stock (2.9% of total net income) than it repurchased, while ExxonMobil, BP and TotalEnergies used stock markets to return cash via buybacks (to the tune of 46.3%, 26.5% and 15.2% of total net income, respectively) to shareholders rather than to attract new funding. During those years, Gazprom’s average annual capital expenditures clocked in at 22.1% of sales, that is, at a much-higher level than for either TotalEnergies (9.4%) or ExxonMobil or BP (6.3% each). All calculations based.

data from Refinitiv Eikon and company reports with small deviations possible due to original data being reclassified by the database provider. Data for Gazprom were used in Russian roubles. See also Åslund (2010), Kreyndel (2015) or Victor (2008) for discussions of Gazprom’s financial performance and strategy.

8. Notably, following the imposition of “an additional one-off extraction tax worth a total of 1.2 trillion roubles […] the company transferred the entire profit made in 2021 to the [Russian government] budget, forgoing the payment of dividends to shareholders for that period” (Wiśniewska 2023).

9. If we zoom in on Gazprom’s corporate geography we find a pattern that is strikingly different from the core trend in overall Russian capital flows, which strongly center on Cyprus functioning as an OFC gateway into the EU. For example, the total worldwide outward FDI position of Russia was $380 billion in 2020, with 48.6% invested in legal entities domiciled in Cyprus (IMF 2022). Remarkably, however, Gazprom does not have a presence in Cyprus.

10. Revenue figures for Gazprom Schweiz AG and Gazprom PAO from Refinitiv Eikon.

11. See Dohmen (2014) for an analysis including Gazprombank.

12. In the Dutch press, journalists’ explanations were straightforward: “Houthoff simply loves the Russians for the money they bring” (Persson and Kreling 2022).