#9 - JRL 7246
Financial Times (UK)
July 14, 2003
Old-style rituals mark new sign of capitalist Russia
The first big Communist-era project finished in the post-Soviet period gave Putin a rare public relations opportunity
By Arkady Ostrovsky

Communist-era rituals were evoked last week to celebrate an industrial achievement of capitalist Russia.

Soviet songs blasted from loudspeakers, torrents of water gushed from sluices under the Russian flag and famous Russian writers were on hand to witness and reflect on the opening of a giant hydroelectric station, the first significant Soviet-era project completed in the post-Soviet era.

Having cancelled three foreign trips last week, President Vladimir Putin flew to the far east of Russia to push the symbolic "start" button on the largest hydroelectric plant built in the country over the past 15 years.

Against the background of Chechen bombings in Moscow and growing scandal around Yukos, Russia's flagship oil company, this was a rare public relations opportunity. The opening of the site was meant to symbolise Russia's economic success over the past five years and to set an example for the next five years of Mr Putin's expected rule.

"In the past three to four years a miracle happened," Mr Putin enthused. "We have managed not only to resuscitate and recreate everything that the energy sector of the Soviet Union and of Russia was proud of, but also to make steps forward. It is a very good sign which shows that the economy is growing and there are conditions for further growth."

The story of the station encapsulates Russia's recent economic history.

It was conceived in the 1970s as one of the Soviet Union's most ambitious long-term construction projects. After the collapse of the Soviet Union in 1991 the investment started to shrink and by the mid 1990s the building of the plant - along with the rest of the Russian economy - came to a halt.

After the 1998 financial crisis when the economy started to grow, the government jointly with the Unified Energy System (UES), a state-controlled electricity monopoly, agreed to restart the project. The cost of the "first construction site of Russian capitalism" so far is Dollars 1.2bn (Euros 1bn, Pounds 736m), which has been priced into electricity tariffs set by the government. This allowed Mr Putin to claim that "the entire country had paid for this station".

It will require additional investment of Dollars 950m by UES to bring the plant to full capacity in 2007.

The high-profile opening of the Bureya hydroelectric plant can be seen in the context of the recent attack on Mikhail Khodorkovsky, the wealthiest Russian oligarch and the head of Yukos, and the public outrage caused by the purchase of Chelsea, a London football club, by Roman Abramovich, another Russian tycoon.

Last week Sergei Stepashin, the head of Russia's Accounting Chamber, shamed Mr Abramovich, saying the proceeds from oil extraction - Mr Abramovich is the largest shareholder of Sibneft, an oil company merging with Yukos - should go "toward development of the Russian economy and the drilling of new oil wells, not the purchase of football clubs".

A skilled politician, Mr Stepashin was voicing the sentiment of the vast majority of Russians.

Anatoly Chubais, head of UES and the ideologue of the project, in an interview with the Financial Times, said that the opening of the plant was "the sign of new times and new life in the country".

"The first 10 years after perestroika was the time of dividing existing assets, now is the time to build new one. In the past 10 years, Russian business meant grabbing assets and money, now business is a skill to respond to demand. In the first 10 years of Russian capitalism the aim justified any means in business, now the means and the reputation are important," Mr Chubais said. "After 10 difficult years of accumulation of capital, the country is starting to move forward."

The opening of the station could also help the political rehabilitation of Mr Chubais. He is one of the most hated figures in Russia, blamed for the cut price privatisation that created the original class of oligarchs.

Persuading Mr Putin to come was a big political victory for Mr Chubais who is also one of the leaders of the Union of Right Forces party.

The president's administration had reportedly tried to talk Mr Putin out of taking part in an event which is likely to strengthen Mr Chubais' position ahead of the parliamentary elections at the end of the year.

The opening of the station, however, gave Mr Putin a rare opportunity to illustrate the main point of his economic course: towards industrial growth and value-added production that would help double the country's GDP - not the wealth of Russian oligarchs.