The energy Crisis in the Russian far east: Origins and possible solutions

Abstract

MORE THAN SEVENTY YEARS AGO the famous GOELRO plan proclaimed the need for the electrification of the whole country as a prerequisite for the victory of Soviet-type communism. It is an irony of history that the current market reforms in Russia go hand in hand with shortages of fuel and energy, with some remote cities becoming real ghost towns in the late evening hours. For miners in Vorkuta and the Kuzbass or ordinary citizens in Vladivostok and on Sakhalin the all too often quoted 'light at the end of the tunnel' can literally not be discerned.1 This applies particularly to the geographically remote areas of the Russian Far East (RFE), which under Soviet rule were predominantly developed as a resource-based frontier and military fortress locked into a typical configuration of metropolitan-periphery structural dependency.2 Here extremely harsh climatic conditions have made it necessary to provide heavily subsidised energy for most of the year. Additional complications include railtracks that run predominantly from west to east and a seasonally limited navigation period for the transport of coal from as far as the Kuzbass in Western Siberia and fuel from the Angarsk oil refinery in Eastern Siberia. Mainly owing to all-embracing military security concerns, the region has a separate energy system based predominantly on thermal, but also some hydroelectric and nuclear power, providing autonomous power generation close to resource extraction sites and defence-related production in widely dispersed and scattered settlements. Additionally, the lack of agglomeration effects and economies of scale in a huge territory populated by less than eight million people provided little incentive for central planners to extend and modernise the existing energy system. With the start of market reform and change in the relative prices for energy and transport the economic viability of the RFE fuel and energy complex (TEK) has come into question. This is largely due to limited consumer demand, the need for long-distance transport of coal and fuel oil and the inability of the military-industrial complex (VPK) to pay its bills after the central ministries dramatically cut military state orders. A vicious circle of non-payments between coal and energy producers and industrial and household consumers has further aggravated a difficult situation. This is the result of sluggish financial discipline and excessive federal and regional subsidies for energy in which industrial enterprises have paid a high price for populist measures to keep household energy prices far below cost-recovery levels, thus further undermining the profitability of the region's TEK. In addition, regional authorities have tried to manipulate the energy crisis politically by openly encouraging miners'