Open Joint Stock Company Gazprom

Ethnic and religious differences in Russia have given rise to tensions, and in some cases, militaryconflict. Such events could have a material adverse effect on the value of investments in Russia and onthe financial condition of a company such as Gazprom.Economic RisksRussia's economy has undergone a rapid transformation marked by periods of significantinstability since the end of the Soviet era. In particular, the Government's decision in August 1998 totemporarily stop supporting the Rouble and its servicing of certain domestic and foreign debts, as wellas the imposition of a moratorium on the repayment of private foreign currency debt caused thecurrency to collapse and led to an overall financial crisis. It is possible that Russia may default on itsdomestic and foreign debt in the future or take actions that could adversely effect its financial stability.Other economic risks that could negatively impact the financial condition of Gazprom include:• failure by the Government to restore access to the international capital markets or maintainthe requisite level of tax collection;• failure by the Government to address systemic problems within Russia's economy, such assustained periods of relatively high inflation, a weak banking system, high national debtrelative to gross domestic product, widespread tax evasion, high levels of organisedcriminal activity and corruption and substantial levels of unemployment andunderemployment which affect the environment in which Gazprom operates and couldadversely effect Gazprom's business as a result; and• fluctuations in the global economy (including, in particular, fluctuations in world prices foroil and natural gas), which may adversely affect Russia's economy and Gazprom'sbusiness.Gazprom produces about 6-8% of Russia's gross domestic product ("GDP") and contributes asubstantial amount of the total tax payments to the federal budget, despite not being paid for asignificant portion of its sales to the domestic market. Although the non-payment situation improvedsignificantly last year (largely because high commodity prices and a massive trade surplus resulted ina budget surplus), and continues to improve this year, there is no guarantee that it will not deterioratein the future.Legal and Regulatory RisksThe following aspects of Russia's legal system create uncertainty with respect to many of thelegal and business decisions that Gazprom's management make:• there may be inconsistencies between laws, Presidential decrees, Government resolutionsand ministerial orders, and between local, regional and federal legislation and regulations;• decrees, resolutions and regulations may be adopted by governmental authorities andagencies without clear constitutional or legislative basis and with a high degree ofdiscretion;• substantial gaps in the regulatory structure may be created by the delay or absence ofregulations implementing certain legislation;• there is a lack of judicial and administrative guidance on interpreting applicable rules andlimited precedential value of judicial decisions;• Russia has a judiciary with limited experience in interpreting and applying market-orientedlegislation and which is vulnerable to economic and political influence; and• Russia has weak enforcement procedures for court judgments and there is no guaranteethat a foreign investor will obtain effective redress in a Russian court.12