Reforms at RAO UES: Chubais rejects the good, Illarionov suggests the bad

The fight to reform Russia’s power industry seems to be entering its conclusive phase. Deputy Raikov and the People’s Party of Russia turned discussions with Anatoly Chubais into a political event. Russian President Putin strongly recommended that the chairman of RAO UES of Russia, the Russian energy monopoly, hold back on reforms. However, Chubais seems to have ignored Putin's recommendation. On the contrary, Prime Minister Mikhail Kasyanov called upon the ministers not to hamper reforms initiated by Chubais. The presidents economic aide, Andrey Illarionov, says that the situation at RAO a national shame and suggests that the top management of RAO resign. This was announced at a Baikal Economic Forum session on September 19. According to Illarionov, the poor professionalism and incompetence of the RAO management have pushed the Russian energy monopoly to a critical state. The presidential aide confirmed his words with impressive statistics: RAO’s shares dropped 60% within the past 1.5-2 years and the capital of the company has been reduced by almost three times, by $6 billion. Electricity production in Russia has been gradually declining fpr the past five years, although the majority of Russia’s largest companies declare increases in output.

What is more, RAO UES of Russia often exports energy at prices that are lower than on the domestic market. “Not a single Russian company takes such liberties. The management of any company in any other country would immediately resign in this situation,” Illarionov says. To tell the truth, this is possible in any other county, but not in Russia. Anatoly Chubais says he will leave RAO no earlier than 2004 (by the next presidential elections), which means that it will be impossible even for the president to dismiss him. Indeed, RAO is a joint-stock company where the chairman is elected by the stockholders. Therefor, Russia will have to put up with the oligarch for some time. As for the situation in RAO, things are not as bad as Andrey Illarionov suggests. According to the reforms suggested by Anatoly Chubais, all competitive energy companies should be concentrated in RAO’s hands, but the unprofitable enterprises should be maintained by the state. After this, enterprises owned by RAO are to be privatized, where foreign investors are more desirable. That is why understated capitalization and cheap shares are really favorable for foreign investors in this situation. For this gift, foreign investors will be especially grateful to Chubais. Perhaps they will even be grateful enough to give him a job at the IMF. The continuous decline in energy production seems to be not a problem at all. Other Russian oligarchs are very tired of Chubais’s tricks and schemes and prefer to buy electricity from energy producers that are independent from RAO UES of Russia. Some of them, for example, the aluminum king of Russia, Oleg Deripaska, are even trying to set up an energy system in Eastern Siberia that will be compete RAO. The oligarchs are also very tired of tariff quarrels with Chubais. If Russian oligarchs, governors, and such producers as Rosenergoatom Concern didn’t have to spent their resources on fighting Chubais’s reforms, they altogether would be able to expel RAO UES of Russia from Russia’s economy. Let Chubais sell energy at cheap prices to China and not to disturb others. Certainly, it would be less expensive to get rid of Chubais once and for all; however, at the moment, neither the Rusian president nor the oligarchs can do this. Dmitry Slobodanuk PRAVDA.Ru

Photo: President's Aide for Economy, Andrey Illarionov

Translated by Maria Gousseva

Read the original in Russian: http://www.pravda.ru/main/2002/09/19/47302.html

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