Academic journal article Demokratizatsiya

The Unified Energy Systems of Russia (RAO-UES) in Central Asia and the Caucasus: Nets of Interdependence

Academic journal article Demokratizatsiya

The Unified Energy Systems of Russia (RAO-UES) in Central Asia and the Caucasus: Nets of Interdependence

Article excerpt

Introduction

Although oil and gas have received the most attention from the international community, something remarkable has been happening in Russian electricity generation. In the fall of 2003, the former Soviet republics began operating on a parallel, integrated grid for the first time.1 This long-dreamed-of goal of Soviet planners was finally accomplished under the corporate leadership of the Russian Joint-Stock Company-Unified Energy Systems of Russia (henceforth RAO-UES). Synchronization of the grid means that the electrical generators across the post-Soviet space are operating in coordination with each other and that shortfalls in one area can be made up with surpluses from another. The coordination has been maintained by the eleven states of the CIS Electric Energy Council but led by RAO-UES. Since coming under RAO-UES's leadership, the member states have seen an increase in the quality and reliability of their electricity. But in several states the energy security implications continue to raise concerns. The Russian idiom for an electricity network is "net" rather than the English "grid." Are the successor states of the Soviet Union becoming caught up in a net of electricity dependency? This article examines the reasons for the ascendancy of RAO-UES in Central Asia and the Caucasus-regions where acquisitions have been recent and extensive. It will also examine the ways in which each of the concerned states has attempted to constrain RAO-UES or to allow the corporation to pursue acquisitions while safeguarding the state's own interests.

RAO-UES

RAO-UES has not merely synchronized the grid covering the former Soviet space. The corporation has reorganized and, in large measure, purchased it. With ownership of an installed capacity of 157.7 million kilowatts and 2,479,000 kilometers of transmission lines,2 the RAO-UES Holding Company has an enormous footprint. By comparison, Électricité de France-the largest electricity company in Europe-has only 130.7 million kilowatts of installed capacity.3

RAO-UES is a parastatal corporation in which the Russian state holds controlling shares. According to its annual report, the Russian state owns 52.68 percent of the company's shares, a figure that has remained constant for years.4 RAO-UES owns 72 percent of the electricity generation capacity in the Russian Federation, and 96 percent of its transmission capacity.5 RAO-UES is considered relatively transparent and commercially successful. Standard and Poor's rating services gave RAO-UES a credit rating of ruA+ (highest ranking in Russia) in 2004 and an overall rating of B+, indicating that it is one of the most promising investments in Russia.

RAO-UES has been led by CEO Anatoly Chubais, a well-known and controversial oligarch in Moscow, since 1999. Often credited as the architect of the first wave of post-Soviet privatization, his portfolio includes having served as first deputy prime minister in the first Yeltsin administration, Yeltsin's campaign manager in the 1996 campaign, and presidential chief of staff in the second Yeltsin administration. Chubais currently serves as both CEO and chairman of the CIS Electric Energy Council, a body that meets annually and includes eleven former Soviet republics. In his travels representing RAO-UES, Chubais is received and treated as a minister of the Russian Federation.6 The corporation has been allocated significant resources from the stabilization fund (the oil fund set aside under the International Monetary Fund's recommendation) to be spent on acquisitions in the former Soviet Union.

RAO-UES is an important and highly visible company in Russia, but Chubais's relations with the Kremlin are not always positive: when portions of the Russian electricity grid failed in May 2005, President Putin blamed Chubais personally, accused him of focusing too much on international projects rather than day-to-day operations, and had prosecutors summon him for questioning. …

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