Heavy Hitter

By Yuri Zarakhovich / Moscow

Passions were riding high Jan. 8, as the hockey team of Russia's state-run energy giant Gazprom locked horns with the Belarus national team in the final game of the annual Belarus President's international hockey tournament in Minsk. In a desperate moment, a Belarusian tripped the Gazprom captain with his stick, but the Russian scrambled back to his feet to pass the puck in a lightning movement that led to a goal. Gazprom won the game 4-3, and the cup. And well it should, smiled the Gazprom captain Alexander Medvedev, 51, because Gazprom always wins.

Just ask Shell or Yukos or Ukraine. Don't even mention it to ExxonMobil. When he's not skating, Medvedev is deputy chairman of Gazprom's management committee and general director of Gazpromexport, Gazprom's export arm, which accounts for 80% of the revenue of the world's second largest energy company and supplies a quarter of Europe's natural gas--and 100% of Belarus'. Medvedev's remark hit home for his fellow hockey buff and adversary--the forward who had tripped him up so uncouthly, also known as the President of Belarus, Alexander Lukashenko. On a tense New Year's Eve night a week earlier, Medvedev forced Lukashenko to accept a price hike that more than doubled the cost of natural gas, from $46 to $100 per 1,000 cu m. To save his economy from collapse, Lukashenko caved, after having dug in his heels for years: he also sold 50% of his national gas-pipeline operator Beltransgaz to Gazprom.

That is what you call a power play. Be it a scuffle with foreign consortiums on Russian soil, or in pricing battles with Russia's neighbors, Gazprom wins very much in style of the proverbial Soviet Army steamroller: inefficient, unwieldy and mismanaged, it crushes foes by its mammoth weight and monopoly gas supply. In January 2006, for instance, when the Ukrainians balked at Gazprom's price, Medvedev turned off the taps. Pay or freeze, he told them. They paid.

Russia's energy general is suave and arrogant, ironic and pragmatic, English-speaking and groomed, aggressive and compliant. Medvedev supervises Gazprom's exports, brushing off allegations of Gazprom being Russia's "pipeline troops," poised to accomplish with energy what the U.S.S.R. used to do with tanks. "There is no politics in our relations with other countries. Just business," he says. And business is booming. Russia is energy rich. Its oil and gas reserves account for more than 20% of its $1 trillion economy.

Medvedev says gas exporters need to coordinate handling the growing development, production and transportation costs, and technological challenges--and acidly reminds you that only Russia, Qatar and Iran have a long-term supply capability. That's why the U.S. got nervous last month when gas producers met in Qatar. Such an OPEC-like cartel might control as much as 80% of the world's natural-gas reserves and 40% of natural-gas pipeline transportation. He proudly emphasizes Russia's leading role in this coordination due to its resources--and feigns surprise at the U.S. calling it a weapon of blackmail.

Capturing Beltransgaz, Medvedev says, was nothing less than restoring the status quo--the Unified Gas Supply System of Russia (UGSS) that supplied the old Soviet empire. "One of the mistakes that our so-called reformers made was having the UGSS sadistically dismembered," he explains to TIME, sitting back, pin-striped and relaxed, in his techno-style office that dominates the ninth floor of the posh new Gazpromexport headquarters in downtown Moscow. His disdain of the architects of Russia's early market reform is de rigueur for top executives under President Vladimir Putin. Medvedev isn't finished. He says Gazprom wants to reintegrate into this system all national gas transport and distribution networks of the former Soviet republics, although using cash more than politics.

Medvedev is the paragon of a top corporate-statist-technocrat executive for the new Russian corporate state. Prior to 2002, when he came to head Gazpromexport, Medvedev had never been involved with natural gas. Born in the far eastern island of Sakhalin to the family of a Soviet air force officer, he left the island in his teens. In 1978, upon graduation from the fabled Phystech, Moscow's Institute of Physics and Technology--Russia's answer to M.I.T.--Medvedev, who majored in automated control systems, got a job with the Institute of World Economy and International Relations (IMEMO), a top Soviet think tank. Eleven years and a Ph.D. in economics later, Medvedev found himself in Vienna as a director of the Soviet Donau-Bank. He then served as director of the Vienna-based Investment Management and Advisory Group (IMAG), launched by Russia. In 1997, Medvedev had his first taste of hydrocarbons as vice president of Eastern Oil Company (EOC), co-owned by IMAG with Yukos. Then, late in 1997, Medvedev clashed with Yukos founder Mikhail Khodorkovsky, who eased EOC out of the deal. Eventually, however, Yukos would be broken up by the state and Khodorkovsky controversially sent to prison.

Medvedev's pro-Putin maneuvering and his willingness to leverage supply power has made him a top gun at Gazprom. And more important, he who controls Gazpromexport controls Gazprom, says Mikhail Krutikhin, chief analyst for RusEnergy, Russia's authoritative energy think tank. Though Gazprom CEO Alexei Miller is also a Putin man, Medvedev was installed directly by the Kremlin independently of Miller, Krutikhin maintains. Both toe the same line, but the Kremlin runs them separately. Mutual mistrust makes for cooperation, to paraphrase Stalin.

The key mission assigned Medvedev was to make sure that previously underpaid billions got collected, says a close associate. And did Medvedev collect. The company's capitalization rose from $11.35 billion in 2002 to more than $300 billion today, mostly as a result of growing energy prices and by accumulating prized assets like Sibneft Oil Co. or parts of the dismembered Yukos.

He runs his business the same way he plays his hockey--sharp and concentrated in handling passes--and he scores, says the associate. Medvedev also hits as hard as the Kremlin wants. One such hit shook Sakhalin Energy (SE), operator of the Shell-led Sakhalin II consortium. At $20 billion, it is the world's largest integrated oil-and-gas-export project, with total reserves of some 4 billion bbl. of oil equivalent (BOE) and total project capacity of 395,000 BOE per day, including 9.6 million tons per year of liquefied-natural-gas production. It is also the largest single foreign investment in Russia. When Sakhalin II's operators initially refused to accommodate Gazprom, the government shut them down for gross violations of Russian environmental law, of all things. Putin personally finalized the deal between Gazprom and SE last December. SE had to sell its controlling share to Gazprom for a bargain $7.45 billion.

Medvedev now says publicly that Gazprom is also targeting the $12.8 billion Sakhalin I project, operated by an Exxon-led consortium. It fits perfectly with Russia's strategy to get more control of its energy assets. Exxon hasn't capitulated by any means, but it still might learn what Belarus and SE did: Gazprom always wins.