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. Last Updated: 07/27/2016

Chubais Project Denied Federal Funds

The government will not allocate any federal funds for the maintenance of housing and communal systems in those towns and cities that have signed contracts with the newly created Russian Communal Systems company, Nikolai Koshman, the head of the State Construction Committee, said Friday.

"In towns that conclude a contract with RCS, let RCS work there," Interfax quoted Koshman as saying. "We will see how these projects will be realized. The government will not allocate budget funds for maintenance in these places."

After virtually being ignored by the government for decades, Russia's so-called communal housing system -- the maintenance and repair of buildings and the supply of basic services such as water, electricity, heat, gas, sewage and garbage -- is on the verge of collapse in numerous regions.

While public and private expenditures on communal services last year totaled more than $17 billion, the government has neglected the housing services to the tune of about $2 billion per year over the last decade and now says modernization will cost more than $15 billion.

Led by Unified Energy Systems CEO Anatoly Chubais, a consortium of powerful groups -- including Gazprom, through its pocket bank Gazprombank, Interros, Renova, Evrofinance bank, YevrazHolding and Kuzbassrazrezugol -- have launched a residential housing and utilities venture called RCS that is aimed at putting the sector "in order."

Koshman said the State Construction Committee is urging the government to allocate 13.47 billion rubles ($440 million) in additional support for the coming winter, but none of the regions where RCS is active will see any of that money.

Chubais said earlier in the week, however, that RCS is not counting on the government's help.

"We have our own resources. If we grab these meager state funds I don't think it will do good at all," Chubais said. "The volumes and tasks in the housing sector are so big that if the State Construction Committee manages to allocate some funds ... it will have plenty of things to spend them on."

RCS was officially registered last week with a charter capital of 1 billion rubles, which is divided into 10 million common shares worth 100 rubles each. UES and Gazprombank each own a 25 percent stake, while the other five members of the consortium each have 10 percent.

RCS expects to spend at least $700 million over the next five years overhauling the sector in the areas it operates in, extending its reach into the country's households.

The list of regions where pilot projects have already been agreed to include the regions of Udmurtia, Chuvashia, Altai, Kaluga, Nizhny Novgorod, Oryol, Perm, Rostov, Saratov, Tver and Tyumen. RCS is also negotiating with the administrations of several other regions.

RCS will establish 100 percent owned regional subsidiaries that will take over all local housing-service functions, ensuring supplies of water, power, heat and gas, television and radio access, garbage collection, sewage service and general building maintenance.