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. Last Updated: 07/27/2016

UES Vote Delayed Indefinitely

Igor Tabakov / MT

Presidential adviser Andrei Illarionov

Leaders of parliament on Monday refused to set a date to debate laws on a controversial electricity sector overhaul, raising concerns that the Kremlin's resolve to reform the lumbering power monopoly has crumbled.

"A decision was taken not to consider this at the remaining two Duma sessions," Gennady Seleznyov, speaker of the State Duma, told reporters when asked about the decision by the chamber's agenda-setting body, the Duma Council.

"One of the meetings of the Duma Council in January will set the date when the issue will be discussed."

The government's plan to smash electricity monopoly Unified Energy Systems and free power prices to attract investment in its crumbling infrastructure appears caught in the crossfire of competing political groups.

Sergei Ivanenko, a senior member of the liberal Yabloko faction, which opposes the reform plan, said the council had rejected a proposal to set a reading date for Jan. 22.

"The fight over this packet of bills is not between Duma factions, it is within the executive branch," Ivanenko said.

Renaissance Capital utility analyst Hartmut Jacob held out slim hopes that the bills could pass quickly when parliament reconvenes after the holidays.


UES chief Anatoly Chubais

"There is still a small chance they might set a date after they meet in January. But that chance is getting smaller and smaller every day," Jacob said.

Parliament and Kremlin alike appear riven by doubts whether the reform should go forward.

President Vladimir Putin in a televised address last week praised legislators' cautious approach to the reform and paid lip service to the main principles of the project, promising steady progress on reform of public services.

That was just two days after his chief of staff, Alexander Voloshin, who also serves as head of the UES board of directors, said the main concern was quality of reforms, not time frames. The remark was seen as official Kremlin approval for delays.

Analysts have said that a failure by the Duma to set a date for the crucial second reading for January or February would probably mean putting off reforms for two years as the Duma will be caught up in an election cycle.

Parliamentary elections are set for December 2003 and any reform involving price increases for consumers would be unpopular among voters. Some centrist factions are lobbying for strict price caps for households. "There will be no heating in the country, people will freeze, everything will be stolen," Boris Nemtsov, leader of the liberal Union of Right Forces party, said Sunday.

"Even a super popular leadership can become outcasts, because they would have to answer why people have to heat themselves around the stove."

UES chief Anatoly Chubais has also poured fuel on raging rumors that influence peddling is behind the multiple delays in the second reading. He said an unknown but politically influential mystery buyer, who is building up a stake in UES, had engineered the delays to depress share prices.

However, Andrei Illarionov, Putin's economic adviser, hinted Sunday that Chubais might himself be linked to the mystery buyer, the Financial Times reported.

"[Chubais] certainly gives the impression of being very well informed" about the individuals apparently purchasing large blocks of UES shares at cut prices in an effort to delay or profit from uncertainties around the reform process," the FT quoted Illarionov as saying.

The comments were vigorously denied by UES.

UES shares slid more than 3 percent to close at 12.7 cents Monday.

"I don't think they'll bury [the bills] too deep," Brunswick UBS Warburg utility analyst Fyodor Tregubenko said. "The new shareholders obviously ... are strategic, not portfolio investors. Apparently they have simply not received an answer to the question of how they will receive assets [in the reform]," he said.

(Reuters, MT)