#9 - JRL 7303
Financial Times (UK)
August 27, 2003
Governor sues over power sell-off
By Arkady Ostrovsky
A governor of Russia's industrial region is trying to review the privatisation of the country's largest hydro-electric stations in a move that observers say benefits the interests of one of Russia's most powerful oligarchs whose aluminium business dominates the region.
Alexei Lebed, the governor of Khakassia, a region in Siberia, has filed a legal suit calling into question the privatisation of the Sayano- Shushinskaya hydro-electric plant. This supplies electricity to a giant aluminium smelter owned by Oleg Deripaska, who controls Russian Aluminium, the world's second largest primary producer.
Mr Deripaska, whose wealth is estimated at Dollars 1.5bn (Euros 1.38bn, Pounds 950m) according to Forbes magazine, is understood to be close to Mr Lebed. Last year he had reportedly paid personal taxes in Khakassia, contributing an extra Rbs294m (Dollars 9.7m, Euros 8.9m, Pounds 6.2m) to the regional coffers.
The dispute comes at a time of heightened sensitivity about the political influence of Russia's oligarchs and their role in the country's reform process.
The move is also seen by foreign and Russian investors as an attempt by oligarchs to secure control of energy resources ahead of the planned break-up of UES, the partially state-owned electricity monopoly.
David Herne, chairman of the committee for strategy and reform of the UES, said: "This is a disaster for the international view of Russia, and this is exactly what foreign markets are afraid of when they see oligarchs interacting with the reform process."
The Sayano-Shushinskaya plant was privatised in 1993, and is 79 per cent owned by UES. Parallel with the law suit, Mr Lebed has also sent UES a draft of a "peace settlement" with the electricity monopoly, under which UES would have to guarantee to supply electricity to Khakassia region at a special limited tariff until 2020. Mr Deripaska's smelter consumes 70 per cent of all electricity in the region.
Seppo Remes, member of the UES board of directors, said: "This comes very close to blackmail of UES and we should be able to fight it."
UES said the true objective of the legal suit was not to return the hydro-electric plant into state hands, but to use it as a leverage for securing low tariffs for the region. Andrei Trapeznikov, a UES spokesman, said: "This legal suit has no foundation. Behind it stand commercial and political interests which have little to do with the interests of the state."
Mattias Westman of Prosperity Capital Management, an investment fund, added: "This could set a dangerous precedent for other regions."
The call for the effective "renationalisation" of a hydro-electric plant comes amid extreme nervousness among the Russian business elite about the safety of their property rights. Mr Deripaska could not be contacted last night.
This follows a crackdown on Yukos, Russia's largest oil company, and the detention in Greece of Vladimir Gusinsky, a former Russian media baron. "While some oligarchs are sitting in prison, others continue to demonstrate their political influence," one observer said.
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