Publication: Monitor Volume: 3 Issue: 60

Prime Minister Viktor Chernomyrdin, the former chairman of the Gazprom natural gas monopoly, last week called the reform of Russia’s natural monopolies a "priority task." (Itar-Tass, March 21) However, Chernomyrdin described plans for breaking up firms like Gazprom and the UES electrical energy monopoly "inadmissible," since "they belong to the entire country". Instead, Chernomyrdin argued, the prices charged by these firms should be subjected to stricter control. Arkady Volsky, president of the Union of Russian Industrialists and Entrepreneurs, struck a similar note two days later, arguing that the natural monopoly regulation was necessary to combat the high prices charged for such items as gasoline, diesel fuel, and coal, which he terms a major barrier to the recovery of Russia’s manufacturing sector. (Interfax, March 23)

The debate on the reform of Russia’s natural monopolies thus seems to be concentrating on price levels, and is moving away from the bold proposals developed by former economics minister Yevgeny Yasin, who was removed from his post in the government reshuffle earlier this month. However, while the prices of gasoline, diesel fuel, and coal may exceed world levels, the firms that produce them are not regarded by Russian law as "natural monopolies," and cannot legally be regulated as such. Moreover, because the State Committee on Antimonopoly Policy (SCAP) may set prices charged by firms with as little as 35 percent of the relevant market, the legal framework for price regulation for these goods is already in place — should SCAP choose to apply it. By contrast, the programs being developed under Yasin’s direction emphasized the introduction of market competition into the natural monopoly sectors. Such measures, if successful, would have reduced the importance of price regulation in controlling these firms’ behavior.

Struggle for Control of Russia’s Aluminum Industry.