Publication: Monitor Volume: 7 Issue: 57

Anatoly Chubais–head of United Energy Systems (UES), Russia’s electricity grid, and architect of the country’s controversial 1990s privatization process–may be facing punishment for the energy crisis in the Primorsky Krai region of Russia’s Far East this past winter. According to a newspaper report published today, during a meeting of UES’s board of directors at the beginning of March, Kremlin chief of staff Aleksandr Voloshin, who is also the UES board chairman, demanded to know who in the company was responsible for the power shortages in Primorye which left thousands of residents without heat. UES’s managers reportedly named only Anatoly Kopsov, a deputy chairman of the company’s management, who is a relative newcomer and has been named as a possible replacement for Chubais as head of the 51-percent state-owned company. In response, Voloshin reportedly called on all of the UES managers who feel “personally responsible” for the Primorye crisis to resign “voluntarily” before March 26, when the company’s next board meeting is set to take place. If none volunteer, the Kremlin will reportedly pick the candidates to be fired. The paper reported that at least four UES managers are likely to lose their jobs, including Leonid Melamed, the company’s first deputy chairman, and three other deputy chairmen–Andrei Rapoport, Valentin Zavadnikov and Mikhail Abyzov. All four are close Chubais allies (Nezavisimaya Gazeta, March 22).

Such reports of Chubais’ impending ouster or waning influence should be treated with caution. Last month, soon after President Vladimir Putin publicly blamed the federal Energy Ministry, the Primorsky Krai regional administration and UES for the Primorye energy crisis, he removed Aleksandr Gavrin as energy minister and accepted Yevgeny Nazdratenko’s “voluntary” resignation as Primorsky Krai governor (see the Monitor, February 1, 5). Chubais, however, was left alone, despite his refusal to accept blame for the crisis. What is more, even Nazdratenko’s “punishment” amounted to being kicked upstairs: Putin named the ousted governor to head of the State Fisheries Committee, which oversees a multibillion-dollar industry (see the Monitor, February 26).

Chubais, however, has been under pressure from UES minority shareholders, who charge that his plan to restructure the company, if carried out, would amount to selling off its most valuable subsidiaries to insiders at below-market prices, in much in the same way that the loans-for-shares privatization scheme, which Chubais oversaw in 1995, handed over some of Russia’s most valuable industries off to Kremlin-connected tycoons. Among the minority shareholders is Boris Federov, the former finance minister who now heads the United Financial Group brokerage firm. Federov has complained about Chubais’ reputation as a “genius reformer” and is working on a “scathing” biography of the UES chief (Financial Times, January 11). And while Chubais has reportedly engineered a split among the minority shareholders by introducing new candidates to the company’s fifteen-member board in advance of the next shareholders meeting, set for April 28, the minority shareholders have apparently found some powerful allies, including Voloshin and Andrei Illarionov, Putin’s economic adviser. Late last year, Illarionov denounced Chubais’ plan to restructure UES, which involves splitting the energy sector into generation, sales and transportation businesses, and selling off UES’s power generating assets as “the second edition of the loans-for-shares auctions” (see the Monitor, December 21). Earlier this year, Chubais was forced to accept changes in UES’s charter which allow a simple majority rather than three-quarters of its shareholders to choose the company’s head (see the Monitor, February 5). Thus Chubais’ fate now truly rests in the hands of the Kremlin, and thus is likely to depend on whether Putin gives the UES chief’s enemies a green light to remove him.

While Chubais was in the past closely connected to Putin–both of them having worked for the late Anatoly Sobchak, St. Petersburg’s former mayor–he has had uneasy relations with the president. Among other things, Chubais opposed Putin’s elevation as prime minister and publicly criticized the alleged influence that the writer Aleksandr Solzhenitsyn, a strong critic of Chubais’ privatization efforts, had on Putin. Chubais also criticized Putin’s decision to revive Stalin-era Soviet national hymn as Russia’s new national anthem (see the Monitor, September 25, October 6, December 6, 2000).