NATURAL MONOPOLY RESTRUCTURING PLANS.

Sections of the text of President Boris Yeltsin’s April 28 decree on restructuring the natural monopolies have been made public. (Interfax, May 4-5) Contrary to the initial publicity, it seems unlikely that the government will force sweeping changes on the three natural monopolies — Gazprom, the railways, and the electricity giant Unified Energy Systems (EES). Instead, the main aim seems to be to persuade the companies to cut prices for industrial users. Electricity rates for the latter are four times those charged to households. EES has already pledged to cut tariffs by 13 percent in 1997 and 25 percent next year.

The most radical changes are planned for EES. This year an independent agency handling wholesale trading in electricity will be introduced, and next year a number of independent generating companies will be created. It is hope that by the year 2000 direct price controls on electricity will be lifted entirely.

As for Gazprom, the plan envisions the introduction this year both of differential prices depending on transport distance, and open tenders for the development of new gas fields. By the end of 1997 the government should also prepare proposals for allowing independent companies access to the gas pipeline system. Steps to bring the prices paid by households into line with the higher prices charged to industrial consumers are postponed till 1998, at which time it is intended also to transfer responsibility for gas price regulation to regional energy commissions. In 1999 Gazprom should be split into fully separate transport and extraction companies — a step which Gazprom has already announced its intention to implement.

These measures, while sensible, will not amount to a fundamental change in the way the company is operated. First Deputy Prime Minister Boris Nemtsov himself has been less radical in his approach than some Western reports have suggested. He stated that "only a madman would destroy Gazprom," adding that "we would also like Gazprom to supply not only half of Europe but half of Asia." (Interfax, 15 April) There is no sign that the federal government is contemplating selling off sections of Gazprom and the other monopolies to foreign energy or transport companies, which would probably be the only way to bring a radically new management style (and new sources of investment) to these sectors.

On 5 May Gazprom president Rem Vyakhirev met with Boris Nemtsov and it was agreed that a presidential decree will be prepared making Vyakhirev personally responsible for the management, in trust, of the state’s 35 percent stake in Gazprom. In turn, Gazprom promises to pay off its 15 trillion ruble federal tax arrears by the end of June.

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