LONDON – Russia's gas monopoly is not known for its modesty, but Yury Anpilogov, general director of a new online steel exchange in which Gazprom is a key partner, described the venture in just that way – a modest project.

Launched in February 2000 in partnership with Gazprom, Interfax and U.K.-based Middlesex Holdings and Hatch Beddows, the project is now listed on the London-based Ofex exchange and raised about $1 million in its IPO.

"The promoters gave us their strategic support and advice and some start-up capital. After that, it was up to us," said Anpilogov, whose Website www.europe-steel.com started trading March 8.

He was speaking here at the Adam Smith Institute's conference on the Ferrous and Nonferrous Metals Sector of the C.I.S.

Many observers raised eyebrows about the project as being just another monopolistic move by Gazprom into the metals sector – one that was bound to fail due to the independence of metal producers and traders. But Angipolov said he had a business plan that stemmed from the strong roots of Gazprom in the metals business .

"Gazprom owns the modern metals works of Oskola [400 km south of Moscow], which was built with Italian and German equipment in the 1970s," he said. It also owns the Lebedinsky Iron Ore works, which supply ore to all metals producers in Russia and has the highest-quality ore in the country.

"We also had strategic arrangements with Nosta, Moldova Mills as well as some pipe mills," he added. "Because of the ownership of some plants and debts owed by them, we are stakeholders in the metals business and we decided to take it online."

Unlike other business-to-business (B2B) exchanges that flourished in the United States and Russia, Angipolov said his project focused on the metals trade rather than technology platforms and the number of visitors.

In fact, we veto many registered users because we only allow credible and well-known trading companies to register with us," he said. "The moment we get an online registration, we start working off-line – on the phone – to make sure that it is a serious company."

The site now lists some 100,000 tons of metal available for trading. "We do not yet have quotas from these plants, but that will be the next step," he said. "In the meantime, there are many cargoes where buyers did not pay, ships did not show up, or some other problems and we shall trade those through the Internet."

Angipolov acknowledged the difficulties in sustaining a business model that is targeted toward taking a cut on the transactions, even though "the transactions will be offline." Having close links with the producers makes this position strong, Angipolov said.

"It is absolutely essential to have a strong understanding of the business, the people involved and a special relationship with the key players. Any kid in a basement can put together a B2B exchange, but very few can deliver the products."

It is this ability and confidence in being able to deliver on the listed products that Anpilogov says sets his exchange apart from similar ventures. "I have a lot of respect for some other online exchanges, such as emetex [www.emetex.ru], Rusmed [www.rusmed.ru] and Metals-Russia," he added.

Angipolv said those project should eventually be successful, as relations with producers bring results and they are able to deliver the listed products and guarantee transactions.

"On the others hand, others, like business.ru will be a failure," he said. "They are already looking for scapegoats even though they spent more money on the portal than all other exchanges combined," he said, referring to www.business.ru – which was floated with much fanfare last year by Independent Media as the key B2B exchange of Russia and was reportedly advised by the global consulting firm McKenzie.

"Our targets are very modest. We hope to be able to deliver 200,000 tons of metals this year and by next year, we shall start making profits." Europe-Steel shares were trading at about 50 pence, about the original price but down from an all-time high of 150 pence.

"At this moment, the big problems are the absence of electronic-signature laws, laws on electronic commerce, lack of credibility and no technology platforms," he said. "That is why we hope to build relations with both suppliers and buyers online and show them that it is beneficial to trade efficiently through our exchange."

That is why, Angipolov said, he spends more time at metals conferences networking with metal traders and bankers rather than speaking at Internet forums and conferences. "An exchange is not about the Internet; it is about metals business."