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. Last Updated: 07/27/2016

Bank Brushes Off Rosugol Coal Loan Attack

Statements by coal monopoly Rosugol claiming that Russia could do without a $250 million World Bank loan to restructure the sector will not affect the decision on whether to release the money, a bank official said Monday.

Vadim Voronin, the bank's Moscow energy specialist, said Russia must still agree to certain targets, "such as improving the channeling of the subsidies to the final recipient and demonopolizing the industry," before the World Bank will grant the second half of a $500 million credit.

Russian First Deputy Prime Minister Vladimir Potanin said after negotiations with the World Bank last week that he expected a "positive outcome" on the loan disbursement by Dec. 10. But bank officials would not give a date for a decision or an assessment of the talks.

The loan, approved last summer, is aimed at helping Russia to restructure its coal industry, in particular by shutting mines and making social payments to miners.

But Rosugol president Yury Malyshev said in an interview with Interfax on Saturday that the first $250 million tranche failed to reach the coal mining regions and coal producers, and that he opposed World Bank conditions for restructuring the sector.

The Russian coal industry is capable of restructuring without foreign loans and with "comparatively insignificant state support," Malyshev told the agency, adding that the industry is "doomed" to a sharp decline in production unless new mines and coal strips are developed.

Voronin, however, said he did not expect Malyshev's statements would have "any impact" on the loan itself because the World Bank was conducting its negotiations with the Russian government, not Rosugol.

Michael Carter, the chief World Bank representative in Moscow, said that how the money was spent was up to the Russian government.

"Our lending is to the budget in general and not to the mining companies themselves," Carter said. "There is no link between our disbursements and the government's expenditures on the coal industry.

"We support the government's program which emphasizes social expenditures to benefit miners," he added.

Viktor Brodsky, deputy head of the coal department at the Economics Ministry, explained Malyshev's comments by saying "the World Bank wants to create competition in the coal industry but Rosugol want to keep their monopoly."

Interfax also reported that Rosugol is expecting the release of 800 billion rubles ($146 million) to the coal industry in November and the same funding in December, payments that would alleviate social tension at Russian mines.

But "in reality, they [the coal sector] will not get that money," said Brodsky, since that amount corresponds to the debts the Russian state has toward the sector and not to the real amounts it will spend.

In the second half of 1996, coal-producing regions' administrations received only about 16 percent of what they were promised, and the industry itself was allocated about 45 percent of the expected amount, he said.

A State Duma deputy said he supported the loan but added that the chamber had asked the Russian government to renegotiate the conditions.

"The loan should arrive before the mines are closed," said Vladimir Utkin, chair of the Duma committee on fuel resources and a member of the opposition Power to the People faction. "In practice, it's the other way around, and either the money arrives late or it doesn't arrive at all,"

Brodsky added that there should be fewer intermediaries between the Finance Ministry -- which receives the loan money -- and the companies themselves, so that the" money doesn't get lost on the way," he said.