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. Last Updated: 07/27/2016

Miners Reject Government's Pay Offering

Coal miners demanding months of back wages rejected a government pay proposal Thursday and renewed their threat for a nationwide strike that energy officials say could have devastating consequences.


More than 800 miners picketing Thursday in front of the Russian government headquarters signed a petition to Prime Minister Viktor Chernomyrdin repeating their threat to freeze coal production Feb. 1 if the government fails to support the struggling industry.


After meeting with representatives of the miners Tuesday, Chernomyrdin signed a letter promising to pay them 600 billion rubles ($127 million) before the end of January. The mine union leader, Vitaly Budko, said it was only a half measure.


"This letter will not help the industry solve its problems even in the nearest future," he said. "This is a one-time payout. The letter doesn't say anything about financing in the future."


If the more than half a million miners in Russia make good on their strike threat, government officials fear a disastrous effect on the country's industry, which depends heavily on energy from coal, and remote areas that rely on it to generate electricity.


"Several regions have coal supplies to last them maybe a day or two," said Alexander Yevtushenko, first deputy minister of fuel and energy, at a press conference Thursday. "In Eastern Siberia and the Far East coal is the only source of energy."


He said some remote areas of Western Siberia and the Far East, which already have to do without electricity six to nine hours a day to conserve coal, would be left with no power at all if coal production stopped.


The federal budget for 1996 allocated to the coal industry 7.4 trillion rubles ($1.5 billion), which, the miners said, is not enough to pay the wages in arrears and revive the declining production.


Chernomyrdin said in his letter the government planned to increase spending on the industry to 10.4 trillion rubles ($2.2 billion) by borrowing $500 million from the World Bank and other sources.


"We don't believe in these loans because the money is not here now, and it's not clear if it ever will be available," Budko said. "We need at least 10.4 trillion rubles to survive, literally."


Financing for the coal industry comes mainly from coal users, of which electricity producers are a major group, and state subsidies.


In 1992, when the government froze the prices for coal, state subsidies amounted to 80 percent of their total income. "State support for the coal industry dropped down overall 10 times," Yevtushenko said. "The costs of producing a ton of coal are increasing along with inflation, while further cuts on state subsidies would result in sharper increases of the coal price."


Electricity producers, among the largest industrial debtors to the coal industry, have trouble paying up because they in turn are owed by their customers and the state.


Russian industry is among the biggest and most inefficient users of energy in the world, Yevtushenko said.