The government has put reform of the gas industry on hold after the head of Gazprom, the world's biggest gas company, said a shake-up would spell disaster. Prime Minister Mikhail Kasyanov pulled Gazprom from the agenda of Friday's Cabinet meeting, reversing an earlier decision to discuss reforms even though Gazprom and the Economic Development and Trade Ministry had not yet agreed on a plan.

The move is the latest turn in a dispute between reform-minded members of President Vladimir Putin's government and Gazprom management, headed by CEO Alexei Miller, which has been strongly resisting efforts to modernize a vast state firm with tentacles reaching deep into the economy.

Analysts said there would be no more talk of reform before the end of the election season -- parliamentary polls are due in December and President Vladimir Putin is seeking a second term in March.

Russia's highly profitable oil industry was sold off to private investors in the 1990s, but Gazprom is by far the largest business asset still in state hands and is a powerful source of patronage, making any talk of reform highly sensitive.

The government said in a statement before the meeting that Gazprom's production and transport units should be separated to make financial flows transparent.

Earlier last week, the Economic Development and Trade Ministry called for a faster reform and said it wanted the Cabinet to discuss giving foreigners the same rights as Russians in trading Gazprom shares.

Foreigners can buy and sell only Gazprom's American Depositary Shares, which trade at a huge premium to local shares. Local Gazprom shares lost 2.54 percent to 37.62 rubles ($1.23) early Friday, while ADSs, each of which represents 10 shares, fell 3.56 percent to $23.

The Cabinet planned to discuss gas reform last December, but Kasyanov canceled the meeting. Miller was reported to have written to Putin saying the reform would damage the firm. Miller, who comes from Putin's home town of St. Petersburg, is widely seen as a protege of the president.

(The Moscow Times 29.ix.03)