Publication: Prism Volume: 7 Issue: 1

By A. Kolganov

A market-based restructuring of the national energy monopoly–Unified Energy Systems of Russia (UES), which handles the production, distribution and sale of electrical and thermal energy–has been under discussion for several years now in government circles, at conferences and round tables, and in specialist literature and the media. Several reasons are given for the need for restructuring. First, the threat of an energy crisis, meaning that more effective economic mechanisms need to be sought for the energy sector. Second, pressure from international financial organizations demanding a market-based restructuring of the national monopolies as a condition for resolving the foreign debt issue. And, third, the need to find a solution to the problem of the huge debt owed by domestic customers to the energy companies.

The question of how to restructure has now entered the decisive phase–a recent government meeting was supposed to endorse the restructuring proposals UES bosses prepared. But this meeting was marked by a political row–the president’s economic adviser Andrei Illarionov accused UES chairman Anatoly Chubais of submitting for approval a proposal which left out important amendments adopted in earlier drafts of the document.

It is not yet clear exactly which amendments triggered the row. However, Andrei Illarionov is not one of those who are fundamentally opposed to the plan. Judging by his own statements, he is unhappy with the attempt to base the UES reorganization on personal rather than national interests. Regardless of what he means by that, there do seem to be convincing grounds for such complaints. Critical salvos are being fired at the restructuring plan from all sides, and the objections are worth listening to.