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MD&A / Risk Management / Country & Regional Risks

Risks

Description

Risk management activities

POLITICAL RISKS

The political situation in Russia is stable at present, with strong executive branches at the federal and regional levels of government.

OJSC Gazprom Neft is a registered taxpayer in the city of St. Petersburg, the second-largest city in the Russian Federation, and the capital of the Northwest Federal District, which has enormous natural resource potential, advanced industries, and a dense transportation network.

Subsidiaries of OJSC Gazprom Neft are present in the following Federal Districts: Central, Northwest, Ural, Volga, Siberia, and the Russian Far East.

On the whole, the Company views the political situation in Russia as stable and does not see any risk of negative developments at present.

RISKS RELATED TO FOREIGN ASSETS

The Company has undertaken a number of foreign projects with the aim of expanding its production geography.

Expansion into new regions is associated with both the possibility of obtaining extra competitive advantages, and with the risk of underestimating the economic and political situation in the countries where the Company has its assets. This could then lead to a failure to achieve performance targets.

Currently, Gazprom Neft sees the level of risks related to its foreign assets as acceptable; however, adverse changes cannot be ruled out, since such risks are beyond the Company’s control.

CORRUPTION RISKS

As the Company actively enters new international markets, there are increasing risks of anti-corruption laws in the US and UK being extended to the Company. Meanwhile, new anti-corruption rules are being introduced into Russian law, along with developing practice of holding organizations liable for violations thereof.

Gazprom Neft is working on a program to control corruption risks. Essentially, the strategy is to make proactive efforts that minimize the risks of liability for any lack of procedures to avert bribery. The program will assess the role of corruption risk in the Company’s risk management system, design a corporate regulation, and devise a strategy for communication support and appropriate employee training.

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