The Electrical Energy in Russia

Previous: Sectors of the Russian economy

**II. The Fuel and Energy Sector of the Russian Economy**

1. The Electrical Energy

*A. The state of the industry and the forms of property*

From the beginning of capitalism-oriented reforms in 1992 to 2008 the only company in this sector was "RAO UES", which stands for "Unified Energy Systems" of Russia. Russian Wikipedia writes that in Russia, the companies of "RAO UES" owned 72% of all energy producing machinery, producing around 70% of all electrical energy and 33% of heat energy. Also, they transported practically all (96%) of electrical energy, as of 2004. The prices in the sector are set by the Federal Tariffs Agency.

As to the ownership of "RAO UES": as of 2007, 53% of the company belonged to the state, 11% to "Gasprom" (another state giant company), 4% to "Noril'sk Nickel" company, and approx. 1% to "SUEK" (a coal-mining company).

In 2008, Medvedev came to power in Russia, and there was a new redistribution of "RAO UES". Some parts of the company were privatized. Wikipedia writes that "almost a half of electrical stations and 22 sales companies have been transfered into private hands". However, the distribution and the dispatcher functions of the company remained in the hands of the state. Tariffs for the electrical energy are still set by the Federal Tariffs Agency.

The newspaper "Vedomosti" notes that the electrical energy produced at the atomic power stations and at the hydroeletric power stations, as well as the prices for this energy, are mostly controlled by the state, and hence there is no free market in this sphere. The "free market" controls 40% of the electrical energy. The newspaper also notes that following the privatization reforms in the 1990's, there is a new "consolidation" (nationalization) campaign in 2000's, bringing the electrical energy companies back into the hands of the large state companies such as "Gasprom" and "Inter RAO UES". This alteration of privatization and nationalization campaigns is typical for modern transitional states.

In spite of the fact that some of the eletrical power stations have become a private property, the state forces these private companies to follow some sort of a general plan for the development of the electrical energy in the country. In one article we read that a chairman of a private electrical company says that the company has an excess of 2000 Megawatts of energy capacity, but is forced by a government agencyto build additional energy stations. In particular, it is forced to build at Kostroma hydroelectric power station two additional combined-cycle plants of 800 Megawatt capacity each, although more than a half of the existing energy capacity of the hydroelectric plant is not used at the present. In addition, the state company "Rosenergoatom" plans to build a new nuclear power station in the Kostroma or Yaroslavl regions.

Approximately 18% of the electrical energy of Russia is produced at atomic power stations, which are owned by the state company "Rosatom". The current plans are to increase the total amount of energy produced at the atomic plants up to 30-40% of the total electrical energy.

   It is interesting for us to note the criminal case of Evgeny Adamov, one of the former ministers of the Russian Federation of Atomic Energy (1998-2001).

"The New Newspaper" (a voice of M. Gorbachev and social-democrats around him) writes that the journalists have started investigating Adamov since 1999. Charges of corruption against him were formulated in 2000, but, curiously enough, he was a part of the Duma commision against corruption. So, the newspaper sent its results to the United States, where a criminal case was started against him, as he was in charge of distribution of the American money earmarked for Russian atomic sector. Perhaps not accidentally, the journalist who led the investigation - Yuri Shchekochikhin - mysteriously died in 2003, as he was leaving for the U.S. to meet with the FBI investigators.

In 2005 Adamov was arrested in Switzerland. There was a tug of war between the U.S. and Russia, as both states wanted to extradite him, and finally he was extradited to Russia. There was a widespread fear that under the pressure of torture he might divulge some of the Russian state secrets. In 2008 he was sentenced in Russia to 5 1/2 years of jail, however, the sentence was appealed, and finally he was given a provisional sentence. Even with a provisional sentence, it means that Adamov was found guilty of stealing millions of dollars, and we may suppose that he d

   idn't take all of the money, but as it is a custom among the bureaucracy, shared a part of it with the Putin clan.

Theft continues to this day in the atomic energy industry. Since 2007, the minister of "Rosatom" is Sergei Kirienko.

According to one newspaper, there is a tendency to increasing theft inside "Rosatom". Each year, more than 100 billion rubles are stolen inside the company (33 Russian rubles is approx. 1 U.S. dollar). The newspaper asserts that the management of the company has developed a scheme whereby the profits of the state company are chanelled into foreign offshore companies.

In one case of a corruption scheme, we hear that in the vicinity of Voronezh, a new nuclear power station is being built. Large amounts of state funds go towards the project. However, the cement supplied for the foundation of the nuclear reactor is of very low quality (below the M-200 grade), and hence the foundation has developed a large crack. Meanwhile the prices charged for the cement, and other materials, are 5-7 times their real cost. The contracts for these supplies (signed in 2007) were awarded to the companies affiliated with the management of "Rosatom".

The bureaucracy is "milking" the state.

*B. Results of Privatization*

    First, as a result of privatizations, the state budget didn't get a single ruble. The reason is that the money paid for the state electrical power stations didn't go to the state budget, but into the pockets of those persons who organized the auctions. Presiding over such scheme of privatization was Anatoly Chubais, who is currently the head of Russian Nanotechnology Corporation.

Second, the electrical energy industry is in much worse condition than it was during the Soviet times. According to magazine "Expert", from 2008, in the Soviet times the coefficient of usage of the electrical energy was 70%, but now it is 42%. Such a drop in the efficient use of the electrical energy is due to the aging of the equipment, which is not being replaced, the theft prevalent in the industry at all levels, and inefficient management.

Third, as a result of the "reforms", the safety of operations has declined, as a result of which we have such accidents as have happened at Sayano-Shushenskaya Hydroelectricl Power Station in 2009. 75 people were

        killed.

What conclusions follow from this? The electrical energy industry must be nationalized, and the existing management system completely replaced.

Nationalization of the electrical industry implies its expropriation from the current "owners", who really stole the power stations from the state. Such expropriations are feasible only as a nation-wide campaign against capital, somewhat reminiscent of the case against M. Khodorkovsky, only on a natonal scale. There can be no talk of buying out the power stations from the private owners, as, for example, M. Gel'man suggests.

    We must remember that the plan for electrification of Russia was not conceived by the current thieves in power. The plan "GOERLO" was concieved by Gleb Krzhizhanovsky, sitting on the right of Lenin in the photo. It was realized by the revolutionary workers and engineers of Soviet Russia.

Next: The Gas Industry in Russia