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#21 - JRL 7254
American Enterprise Institute
July 15, 2003
Privatizing Russia's Electricity
By Leon Aron
[DJ: Footnotes not here.]

On May 30, 2003, at their annual meeting, the shareholders of the world's largest utility, the Russian Joint-Stock Company "Unified Energy Systems of Russia" (UES), approved a detailed plan for breaking up the company and fully privatizing most of its spun-off successors. The decision marks a turning point in a political and economic saga that has dominated the Russian reform agenda for more than a decade.

UES accounts for 69 percent of Russia's electricity production of 890 billion kilowatt hours (kWh), the world's fourth largest output after the United States, Japan, and China.[1] (The rest of Russia's electricity is generated by the state-owned nuclear power plants operated under the Ministry of Atomic Energy or Minatom.) The company also owns 1.7 million miles of power lines. These enormous assets, along with a market capitalization of over $10 billion and 680,000 employees on payroll, prompted Western observers to call the reform "the largest ever corporate breakup."[2]

The man behind this reform is the CEO of UES, Anatoly Chubais, the Yeltsin-era "privatization tsar" and former deputy prime minister responsible for reducing Russia's annual inflation rate from 200 percent to 22 percent between 1994 and 1996. After the May 30 shareholder meeting, Chubais declared: "This plan fits in with the logic of everything I have been doing in the past fifteen years to break up state enterprises and create a free market. The fight for restructuring is over. The market and the business community have accepted the logic and mechanism of the UES restructuring. Now there is no way back."[3]

The reform plan was developed by Chubais and his colleagues over the past five years and is expected to be implemented between 2003 and 2008; the breakup, corporate restructuring, and sell-off to be completed by 2006, and the transition to mostly free wholesale and retail markets by 2008. Hence, the plan's sobriquet, "5+5." Virtually every detail of the breakup of UES, one of Russia's three "natural monopolies"--the others being the Ministry of Railroad Transportation and the natural gas giant Gazprom--has been contested in an unprecedented public debate in the mass media, parliament, the government, and among the company's shareholders. In the words of a leading Russian business magazine, "The impact of this . . . reform on the general population, macroeconomic conditions in the country, and the political system is so substantial that almost every national and international figure associated with Russia and its economy has gotten involved in a highly passionate debate. . . ."[4]

Central to Russia's effort to overcome the backwardness, decaying infrastructure, enormous state subsidies, waste, and distortions bequeathed by the Soviet Union, the forging of a free market for electricity follows tax reform and land privatization in what might be called the brass tacks structural changes that go to the heart of the legacy of Soviet socialism. In line for reform are public housing, heat and water utilities, the pension system, healthcare, and the breakup of the gas and railways monopolies, which, as President Vladimir Putin put it in his 2003 state-of-Russia address to the Federal Assembly, "are suffocating the competitive sector of our economy."[5]

In addition to their centrality in the lives of tens of millions of people, these reforms share the desperate need to remove budget-busting subsidies and price controls, create competition, attract massive private investments, and achieve profitability. At the same time, they must also ensure continued access to electricity, housing, medical care, and transportation for most people in a country whose population is still plagued by widespread poverty inherited from the Soviet Union. If successful, the reforms will radically alter the relative weight of and relationships between the components of the people-economy-state triangle, which is the foundation of every modern capitalist democracy.

The Soviet Legacy

Price Controls. Unlike over 70 percent of the Russian economy in the private sector, the state-owned or, like UES, only partially privatized "natural monopolies," continue to suffer from the congenital Soviet economic maladies: distorted prices, waste, and decay. Prices for electricity, both wholesale and consumer tariffs, are set each year by the Federal Energy Commission and regional energy commissions. Costing the Russian treasury billions of rubles in subsidies, the prices are so low as to be virtually symbolic--and nowhere near covering the cost of production, much less being able to bring in a profit.

Although the tariffs have increased by orders of magnitude since 1998, when Chubais became the CEO of UES, they ranged in 2002 from 48.77 kopecks per kilowatt hour for individual customers (1.6 cents at the current rate of exchange) to 64.85 kopecks for industry (2.6 cents).6 (In the United States, the price of electricity averages 4.83 cents for industrial clients and 8.45 for residential ones.[7]) Because of price controls, natural gas, which accounts for 40 percent of Russia's electricity generation, is almost five times cheaper inside the country than on the world market.

In addition to direct subsidies from the treasury, the electricity market is distorted by the so-called cross-subsidies, that is, different prices charged to different consumers. The tariffs are highest for industry, much lower for agriculture, and lowest for individuals and families. Last year, depending on the region, industrial tariffs were two, three, and even four times higher than residential ones.[8] This year, in order not to exceed the government-set limit of 14 percent growth in residential prices, the Federal Energy Commission had to raise industrial tariffs in some regions by 25 to 30 percent.[9]

The prices that power generators are allowed to charge are based on the government's estimates of their "operating costs." If the operating costs rise, the generating monopolies lobby the government to increase tariffs; if production costs are reduced, the tariffs are lowered as well. As a result, incentives to cut costs are eliminated almost entirely. Price controls also force Russian generating companies to sell electricity at a loss, which by the end of last year reached 15 billion rubles, or $500 million.[10]

Waste and Decay. With prices below production cost, waste is endemic and rampant, and 30 to 40 percent of Russian energy is lost in production, transportation, transmission, or inefficient consumption.[11] In the end, Russia expends three times more electricity per unit of produced GDP than the United States or EU countries.[12]

Most of UES's fixed assets are thirty or more years old and are approaching the end of their planned operational life, yet neither UES nor the state has the money necessary to modernize equipment on such a giant scale. Last winter, which was unusually cold even by Russian standards, the breakdown of the nation's heating and electricity infrastructure became one of the most urgent political and social issues.

Desperate Need for Investment. In addition to securing a daily supply of electricity and heat, a massive overhaul of the energy sector is needed if Russia is to join the ranks of world economic powers. By the government's estimate, in order to sustain economic growth, electricity generation will have to increase by 14 percent by 2010 and 54 percent by 2020, with 15 to 20 million kilowatts added annually in the next seventeen years.[13] This will require capital investments ranging between $167 billion and $267 billion.[14] Even under the most optimistic budget forecasts, the state is not likely to be capable of contributing more than 5 percent of these enormous sums.[15] Attracting domestic and foreign private investments on such a scale will not be possible in a loss-making and opaque business environment, which is plagued by a multiplicity of rules and exemptions and fraught with corruption, waste, and theft. Instead, the energy sector must be made competitive, transparent, and profitable.

According to the engineers of the UES reform, it was conceived, first, in order to "create an electricity market, which . . . would force [generating and distributing] companies to lower their expenses"[16] and second, to "attract investments in order to re-equip the entire sector."[17]

The Long and Winding Road

The Partial Privatization of the 1990s. The need to privatize electricity production and distribution has long been recognized in Russia. A year after the August 1991 revolution, President Boris Yeltsin signed a decree on the "management of the electric energy complex of Russia in the conditions of privatization."[18] This executive order transformed the Russian electricity sector (except for the nuclear generators) into a single joint-stock company with the federal government its principal shareholder. Today the government holds slightly over 52 percent of the UES stock, and foreign portfolio shareholders own approximately half of privately held shares, or 20 percent of the total. The partial privatization was duplicated on the regional level in seventy-six regional electrical monopolies, or energos. UES (and hence, the state) took controlling stakes in seventy-four of them.

The 1992 reform was intended as only the first step. To Russia's free market reformers, the transformation was not complete as long as the state continued to own most of the electricity sector and, just as importantly, as long as UES and the local energos remained vertically integrated, thus precluding competition in generation, distribution, and sales.

Yet like many structural reforms in the 1990s, further privatization of the energy sector and the creation of free wholesale and retail electricity markets fell victim to the "cold civil war" between the Yeltsin administration and a parliament dominated by the Communist-led reactionary Left. Bogged down in the short-term management of multiple post-revolutionary crises, tormented by the severe decline caused by the implosion of the Soviet economy for which it was blamed, the pro-reform government was too weak, unpopular, and distracted to take on the leftist plurality in the parliament in order to pursue such an enormous and politically risky project.

Of the several other attempts during the 1990s to revive the reform, the most notable was Boris Yeltsin's March 6, 1997, state-of-Russia address in which he called for phasing out state subsidies and creating a competitive market for electricity (as well as for water and heat) by 2000. The Left, both inside and outside of the parliament, vehemently attacked the proposed dismantling of state-owned "natural monopolies," and, after the developing markets financial crisis in the second half of 1997, the Russian government's default, and ruble devaluation eight months later, the reform was abandoned altogether.

The Chubais Appointment. When Anatoly Chubais took over as the company's CEO in 1998, payments in cash accounted for less than one-third of UES's settlements with generators and consumers; the rest were paid in kind or were part of a complex and thoroughly corrupted system in which the state subtracted electricity bills from the payments it owed industrial suppliers or was not paid at all, particularly in the case of millions of apartment dwellers, military bases, or the dying collective farms. After UES was allowed by the government in 2000 to disconnect nonpaying customers (including military installations and, in one celebrated case, a missile base) and after Chubais also succeeded in pushing through a ban on all non-cash settlements starting January 2001, the proportion of cash payments rose from 35 percent in 1999 to 92 percent in 2001. Still, today UES is owed 150 billion rubles, or $5 billion, in unpaid bills.

Gradually the prices were raised to the point where they began to approach the cost of production. Cross-subsidization was considerably diminished by narrowing the gap between industrial and residential tariffs. Yet, for Chubais, his colleagues in UES, and their supporters in the government, these positive trends were only steps toward making the company attractive to investors for when, not if, the time was ripe to break it up and sell off. "Electricity still operates in the Soviet style," Chubais said last February. "The consumer is chained to the producer. There is no choice, no competition, and no stimulus to save costs or to invest."[19]

The Opposition. Chubais envisioned a corporate restructuring taking no longer than three years, the transfer of most assets to private ownership, the end of price controls, and a transition to free wholesale and retail markets. Yet, because of the unprecedented transparency and publicity that attended the debate about the plan, these goals had to be balanced against the concerns of the Duma, the Kremlin, mass media, and the Russian public.

Some critics of the plan, including Putin's personal economic adviser, Andrei Illarionov (who in the past three years has used literally every forum, domestic or international, for ad hominem attacks on Chubais), argued, vaguely but intensely, that the plan had not been at all thought through and would make the generation and distribution worse, not better; that it left too much power over the electricity distribution to UES executives; that it robbed the state of its assets; or, alternatively, that it forced the state to pay too high a price for keeping them.

The reform was fought tooth and nail by the vast government bureaucracies loath to part with their controls over electricity prices and distribution. Others, particularly Duma deputies in the 2003 election year, insisted that the transition to market-set prices would result in both huge tariff hikes for individual consumers, diminishing reliability of supply to cash-strapped government institutions and the military, and blackouts for nonpayments by the poor. The leader of the Yabloko liberal opposition party in the Duma, Grigory Yavlinsky, who for years has castigated Chubais in the most personal terms, contended that the reform would result "in unrestrained price and rate increases . . . stimulate inflation . . . lead to the decapitalization of businesses [and] . . . destabilize all economic markets." [20] Needless to say, the Communists in the Duma confidently predicted yet another major "squandering" of the state's property.

Mindful of the privatization experience of the early 1990s, the minority shareholders of UES were alarmed by the prospects of insider deals, sales of assets at extremely low prices, and share dilution. Undoubtedly, the shareholders' fears of corporate skullduggery were fed by the memory of the 1995 "loans-for-shares" deal. At that time, the Russian state was in the midst of a painful transition from its past reliance on ownership of the economy as the source of income to a new system of tax-based revenues. Desperate for cash to pay the military, tens of millions of pensioners, and millions of state workers, including teachers and doctors, the government, in effect, exchanged its majority ownership in some of the most profitable of Russia's enterprises for loans from top privately owned banks and industrial conglomerates led by the well-connected "oligarchs." Even discounting the political instability and the very real risk of a Communist takeover, many experts contended that the sums "loaned" to the state were nowhere near commensurate with the enterprises' value. That Anatoly Chubais was reportedly instrumental in arranging the deal, if not, actually, presiding over it, added to the unease of UES shareholders.

Many governors, meanwhile, opposed the reform because it would drastically reduce their influence over local energos currently regulated by the regional energy commissions. Finally, the industries most dependent on cheap subsidized electricity deployed their very formidable resources in lobbying the government and the Duma against the Chubais plan.

Putin's Intervention. Although the outline of the UES restructuring was approved by the government on July 11, 2001, it took almost a year and a half for the Duma to consider the legislation. Chubais remained steadfast. "Reform and liberalization is the only realistic way to cut prices and create incentives for energy businesses to cut costs," he insisted. "Nothing in the past 2,000 years of world history has been more effective for that than competition."[21]

Only after Putin's personal intervention, following a December 2002 meeting in which the president listened to the principal arguments and decided to support the reform, was the breakup of UES put on the Duma's agenda by the progovernment factions in the legislature in early 2003. Prime Minister Kasyanov personally went to the parliament to persuade the undecided.

The Vote. The vote on the second, critical, reading of the UES legislation took place on February 14, 2003. According to the Duma practice, all bills have to go through three readings, or versions, with the parliament voting on each one. By that time, 1,800 amendments had been submitted, of which 420 were fully or partially incorporated into the legislation. Yet even with all the amendments and after intense lobbying by top government officials and UES management, the passage of the reform remained very much in doubt.

In the end, a considerably modified, yet still recognizable version of the reform, packaged in six bills, was passed by a very slim margin of twenty-four votes in the 450-member legislature. Fully one-third of the deputies voted against the reform, including the entire Communist and Yabloko factions. Yabloko activists picketed the Duma during the voting to protest the legislation.

The "5+5" Compromise: Structure, Ownership, and Prices

Signed into law by Putin on March 31, the final plan is a delicate and, at times, rather contradictory compromise between the key parties: the state as principal owner, enforcer of rules, and self-appointed protector of the consumers; the Duma center-left majority; the UES minority shareholders; the powerful private industries dependent on electricity; the reformers in the UES management and in the government; and the regional governors.

The Structure. Following the Duma vote, the management of UES produced a forty-seven-page detailed guide for the company's breakup and sale. Posted on the UES website in April 2003, the "5+5" plan envisions four autonomous companies "unbundled" from UES by 2006. The Federal Grid Company (Federal'naya setevaya kompaniya) will control the high-voltage grid (the low-voltage networks will remain the property of regional energos), thus making the FGC the high-voltage lines monopoly. The thirty-eight largest power plants will be parceled out between ten newly created wholesale generating companies (Optovye generiruyushchie kompanii), or WGCs, each with an average installed capacity of nine gigawatts, the size of a major U.S. or European utility. The System Operator (Systemniy operator) will be the main "dispatcher,"[22] or coordinator of electricity flows transmitted via the high-voltage grid, and the Trade System Administrator (Administrator torgovoy seti) is envisioned to be a nonprofit entity ensuring a level playing field for all wholesale buyers and sellers of energy. The Trade System Administrator will serve as the "central site" for selling and buying electric power.[23] The regional energos also will be restructured into privately owned entities dealing in generation, transmission, sales (distribution), and system operators.

The Ownership. The final breakup of UES is projected for 2006. In the meantime, following a sustained and vociferous campaign by the minority shareholders, especially the foreign ones, the shares of the future companies to be spun off UES will not be sold on the stock market. Instead, ownership of these assets, the most desirable of which are WGCs, will be determined though "proportionate distribution"[24] of shares, in which the UES shareholders will be offered to swap, pro rata, their stakes in UES for shares in the newly formed companies. Similarly, stockholders will be able to exchange their shares in the regional energos both for shares in the local successor companies and for those of UES.

Initially, UES (and, through it, the state) is set to hold a stake of no less than 49 percent in each of the WGCs. Unlike other UES shareholders under the "5+5" plan, however, the state will not be swapping its UES shares to increase its ownership of the WGCs. On the contrary, the state will divest itself completely of stakes in the generating companies, auctioning them off gradually, with UES shares, again, serving as the sole legal tender.

Among the preemptive concessions made by the reform's architects in order to secure the support of the center-left in the Duma was the state's majority ownership of the Federal Grid Company and the System Operator. Bringing the state's ownership to the 75 percent plus one share, as required by the law passed by the Duma in February, will cost the Russian taxpayer over $2 billion.

The Market and the Prices. The continuing state ownership of the national high-voltage grid was part and parcel of the general tendency toward lengthening the transition and increasing government control, which distinguished the final Duma version from the original reform design. The original reform envisioned a relatively quick transition to a competitive and free wholesale market consisting of the ten WGCs (and later the Minatom nuclear plants), as well as any future entrants, with each guaranteed nondiscriminatory access to both high- and low-voltage grids.[25]

The Duma majority replaced the deadlines built into the original plan with the government's broad and only vaguely described authority over the pace of deregulation. The legislature also removed the June 1, 2005, deadline for the establishment of an unregulated wholesale market. Instead, the price share of the wholesale market is to increase as more independent generators (sellers) and suppliers (buyers) enter the market and contract prices directly with one another. Meanwhile, in 2003, WGCs will be able to sell only up to 15 percent of the electricity they produce at market-set prices.

Furthermore, even after the end of the transitional period and the establishment of an unregulated wholesale market, WGCs will have to sell up to 35 percent of the energy they produce to one or several so-called "guaranteeing suppliers" on the basis of three-year contracts. Guaranteeing suppliers are distributors (retailers) designated by the state to sell electricity to "households and other socially important consumer groups."[26] The guaranteeing suppliers' prices and profit ceilings will be determined by the state.[27]

The state will continue to set the upper limits for retail tariffs. The across-the-board regulation will be gradually phased out, yet beyond 2008 some form of price control will be preserved for the poorest of consumers through the system of guaranteeing suppliers.

Mindful of the California energy crisis of 2001, the reform designers have managed to link retail tariffs to wholesale prices, thus enabling the wholesellers, even within government-set limits, to pass at least a portion of the rate increases onto the consumer. Furthermore, the reform's defenders insisted that, despite the substantial risks inherent in government-set limits on prices during the transition, the danger of a "California" will be mitigated by the abundance of energy resources, the size and diversity of generating companies, and the low, controlled price of gas, which is the single largest source of electricity.

The Market Response. Undervalued for years because of the uncertainty of the reform's passage, UES shares dropped sharply in January 2003 when prospects for the breakup and privatization looked very bleak. The stock recovered after the February 14 vote and has skyrocketed since, jumping 13 percent on May 22 in anticipation of the positive decision at the May 30 shareholders' meeting. Altogether, in May, the capitalization of UES grew from $6 billion to $10 billion.

Part of the boom was due to a buying spree by some of Russia's major conglomerates, whose owners, including top "oligarchs," have been quietly acquiring stock since last summer while publicly decrying the reform and thus talking the stock down. Especially active have been the MDM group, the largest supplier of coal to electricity power plants, and the Basic Element holding company, the world's second largest producer of aluminum. The two companies are estimated to have spent at least $1 billion on UES stock since the fall, 2002. In the May 30 meeting, MDM and Basic Element secured three of the fifteen seats on the UES Board of Directors.

The approval of the UES breakup by the Duma is also likely to have been instrumental in the ambitious decision by General Electric to increase its projected sales to Russia tenfold, to $3 billion by 2010.[28]

A Test of "Civilized Capitalism"

In addition to critics' concerns about the reform and its implementation, some of which have been outlined above, there are still other reasons to be cautious about it. As it does everywhere, the state's control over prices and quotas during the transition opens the door to manipulation and corruption. Still more inviting of venality is the government's mandate to set individual quotas for generating companies' sale of electricity at market-set prices.[29] The elimination of the original deadlines and the government's ill-defined authority over the pace of the reform's implementation further erode confidence.

The deal's complexity, while perhaps inevitable given the multiplicity of forces shaping the final compromise, is another cause of concern. No one--not even the industry analysts who followed the reform for the past two years--is entirely certain as to how the numerous pieces of legislation incorporated into the final version will affect the implementation.

These very real dangers are mitigated by the legislation's stated commitment to free wholesale and retail markets (hence, the "fade-outs" of state controls over most prices in the next five years) and by the Putin administration's proven record of strong commitment to structural reforms, most notably taxation and land privatization. It is reasonable to expect that the implementation will proceed faster and more confidently, than it appears today, after Putin's very likely reelection to his second and final term in March 2004.

Significance Far beyond the Specifics. Yet much of the significance of the UES reform is to be found in the manner in which it unfolded and is likely to be carried out. As Alexander Voloshin, chief of staff of the presidential administration, chairman of the UES board of directors, and one of the reform's major supporters, put it last January, "The price of a mistake [was] quite high. [The debate] had to be long and result in compromises; only then would [the reform] be well balanced. Of course, the authors of the reform wanted it to move fast, while the opponents did not want it to move at all."[30]

Unlike the 1990s, the broader clash of values epitomized by the UES debate is no longer between the proponents and opponents of private property. Even the Communists no longer advocate, at least publicly, a return to total state ownership of the economy. Instead, as Russia is forced to deal with the dysfunctional remnants of the Soviet welfare state, which provided, essentially free of charge, basic services of the lowest quality in exchange for totalitarian controls and equality in poverty for all but the nomenklatura few, the dispute is about the size and nature of the state's involvement in the provision of these services.

The UES reform is part of Russia's ongoing grappling with one of the key dilemmas facing poor democracies (and some rich ones as well): Should the state continue to be a major owner of vital assets and public goods, and to exercise control over their delivery--or should the ten-year-old Russian nonstate sector, in which over 70 percent of the Russian GDP is produced today, be trusted to take over some, if not yet all, indispensable economic activities? Never have the opposite sides of the debate jostled so furiously in public view as during the UES debate. The victory of market-based solutions by a very narrow margin and at the cost of compromise on a number of important matters foretells more and equally raucous debates.

Not an Easy Task. In the transparency and the publicity of the negotiations and compromises between the key institutional players, and in the attempt to balance the imperatives of economic progress with the state's social obligations, and in the carefulness of deliberations, the "5+5" plan has set a precedent that is likely to be revisited over and over during the construction of what the Russians call "civilized capitalism."

The task will not be easy. In the early 1990s, the thoroughly corrupt and criminalized Soviet economy of shortages gave rise to a private economy in many instances disfigured by congenital maladies: secretiveness, insider deals, corruption, the confluence of political and economic power, abysmal corporate governance, and disregard for the rights of shareholders.

Much in Russian business practices--accounting, corporate governance, the rights of minority shareholders, and the payment of dividends--began to hew closer to international standards after the crisis of 1998, and it is of this change that the electricity reform is emblematic. "He is trying to finalize the peaceful revolution begun in 1991," one of Chubais's long-time colleagues said of the reform's architect. "This is the final step. He understood you have to restructure UES if you want to create a market economy."[31]

Should the UES reform prove both economically and politically viable, its success is likely to prompt undertaking other long-postponed and painful structural reforms in President Putin's last four years in the Kremlin. Their implementation will be a giant step toward breaking with the Soviet past.


#5 - JRL 7255
TV1 Review
Compiled by Luba Schwartzman (luba_sch@hotmail.com)
Research Analyst, Center for Defense Information, Moscow office

Thursday, July 17, 2003

- Russian President Vladimir Putin discussed problems facing small Russian cities at a meeting with local administrators in Staraya Ladoga. Trouble areas include the budget, housing and utilities and high taxes.

- Prime Minister Mikhail Kasyanov chaired a Cabinet meeting on the future of privatization of federal property. The government will sell its shares in almost 2,000 enterprises next year, worth a total of at least 35 billion rubles. Also on the agenda was the development of the domestic fishery industry.

- Prime Minister Kasyanov is heading to Ukraine to attend a meeting of the Russian-Ukrainian Cooperation Commission.

- Minister of Foreign Affairs Igor Ivanov is ending his tour of the Middle Eastern in Egypt. He has already visited the Palestinian Autonomy, Jordan and Syria. Ivanov declared that the UN Security Council should review the situation in Iraq and consider future actions.

- Chairman of the Europan Commission Romano Prodi suggested that a visa-free regime between Russia and Europe may be established by 2008.

- Search-and-rescue workers in Moscow practiced procedures in the event of a terrorist act.

- The prosecutor in the Budanov case demanded a sentence of 12 years of imprisonment in a maximum-security prison for the colonel, who is accused of killing Chechen girl, Elza Kungaeva.

- Minister of Defense Sergei Ivanov is inspecting the Southern Federal District. He visited the 10th special-purpose brigade, deployed in Krasnodar Krai.

- Federal Security Service Director Nikolai Patrushev arrived in Chechnya to check up on the transfer of operations in the North Caucasus from the FSB to the Ministry of Internal Affairs.

- Three people died and 30 were injured when a remote-controlled landmine went off in Khasavyurt.

- The Day of Naval Aviation was marked in Russia.

- Military observers and UN civil police officers completed a training program in Solnechnogorsk.

- In Sochi, a teenager who was shooting passersby from an air rifle has been detained. He wounded 6 people, including a pregnant woman.

- Three poachers were detained in the Vladivostor Port. They were carrying the skeleton of an Amur tiger.

- The Russian city of Pskov celebrates its 1100th anniversary.

- Entrance exams begin at most Russian universities.

- Over 10,000 people participated in a religious procession commemorating Nicholas II, held in Yekaterinburg.

- Rural doctors are in desperate need of ambulances.

- Major hurricanes and rising water levels are expected in Russias southern regions.

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