Russia may face an energy crisis unless it undertakes a wide ranging reform of its energy sector, reducing subsidies and improving regulation, according to the Organisation for Economic Co-operation and Development (OECD). Its latest economic survey of the country estimates that subsidies in the energy sector account for nearly 5 per cent of gross domestic product.
The OECD highlights a lack of transparency in the state-controlled electricity monopoly UES, and at Gazprom in which the state has a 38 per cent stake. This situation has hindered effective regulation and hampered inward investment from abroad which is needed to improve the aging infrastructure, the report claims.
However the report also warns of the dangers of raising prices too quickly. And it praises the government for reforms since the last report, in 1999-2000, reforms which have led to higher growth and investment, a stable exchange rate, the elimination of budget deficits and lower unemployment and inflation.
Meanwhile the ceo of the UES has criticised the government's tariff policy saying it failed to give the company's customers a clear idea of prices for a full year. The government has approved a 20 per cent rise in electricity prices from 1 March but has said it will return to the issue later in the year.
UES is planning to hold a tender in the third quarter of the year which could lead to the first strategic investor in the Russian power industry. It has also outlined its ambition to unify its grid with that of Europe.
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