Publication: Monitor Volume: 4 Issue: 88

While last week’s appointment of former First Deputy Prime Minister Anatoly Chubais as chairman of the board of governors of Russia’s Unified Energy Systems (UES) evoked strong protests both in parliament and from the leftist opposition (see the Monitor, May 1). Chubais’s designation also met with strong support from influential regional leaders. This support results in part from the hybrid ownership structure of Russia’s electricity monopoly. It also suggests that, rather than being an attempt by President Yeltsin to impose his will on the parliament (as the opposition charges), Chubais’s appointment may have reflected a willingness on the part of the Kremlin to seek an accommodation with the regions in the run-up to Prime Minister Sergei Kirienko’s April 23 parliamentary confirmation.

Although UES is often described as one of Russia’s largest firms, it is really a holding company in which the firm’s central management is partly subordinated to the regional power generating companies–the “Energos”–that (as of May 1997) held some 30 percent of UES stock. While the Energos, which produce the vast majority of Russia’s electricity, are partly owned by UES as well, most of the generating companies are controlled by the regional governments. Oblast and republican governors, some of whom sit on UES’s board of directors, therefore have a great deal of formal and informal influence over UES management. Had Chubais’s candidacy been unacceptable to regional leaders, it is unlikely that he would have been approved.

As was made clear last week in remarks made by regional leaders, however, this is not the case. Saratov governor Dmitri Ayatskov, a member of the “Povolzhya Energy Systems” Energo’s board of directors, told Interfax that he supported Chubais’s candidacy, since Chubais is “intelligent and will do everything possible to normalize electricity pricing and straighten out the unified energy system.” Ingush President Ruslan Aushev called Chubais a “splendid organizer and manager,” while Tatarstan President Mintimer Shaimiev added that, in his mind, Chubais’s appointment “was never in doubt.” (Russian agencies, April 30)

Perhaps most surprising was the praise offered by one of Chubais’s nemeses, Moscow Mayor Yuri Luzhkov. Luzhkov told the press on April 30 that Chubais’s appointment was “in some sense justified, and could give good economic results,” since Chubais “is a very strong and influential administrator.” His skills are needed, Luzhkov added, both to help bring down electricity tariffs and to introduce competition into the production of electrical energy. Luzhkov emphasized that he continues to hold critical views of Chubais’s privatization program. He also said that he would zealously guard the interests of MosEnergo in the Moscow power company’s relations with UES. Still, the strong support that Chubais has received from regional leaders suggests that, if the Kremlin had to push to get Chubais appointed to UES, it did not have to push very hard.