After the presidential elections in Russia, experts began to predict a new cabinet of ministers. This week Vedomosti cited four federal officials as saying that the most important minister of Putin’s government, Igor Sechin, who deals with the FEC, won’t work in the next government. The Fuel and Energy Complex would probably go under the management of the general director of Rosatom, Sergey Kiriyenko. Yesterday economic experts discussed further development of the FEC, its management system, and possible diversification projects.
The chairman of the Duma committee on energy, Ivan Grachev, said: “The FEC in Russia is a priority branch, and in all situations it should stay a priority for our country. I believe that prosperity is appropriate to energy demand. After the years of crisis there was a utopian idea: the world is said to change, and further prosperity can be accumulated without accumulation of energy demand. However, all recent reports say that the pause has come to an end. At least by the 2030-2050s a simple law will function: if you want to live better in a consumer society, you should produce and use more energy. That’s why the FEC will remain a top priority, as a generator of prosperity, and no technological revolutions could change it. By the way, the world is not interested in the way Russia would accumulate its energy exports. Money will be invested – both ours and foreign – in extensive development of our FEC. Trillions of dollars are spent on development of the Eastern and Northern directions. Such a variant is favorable for the world, but not for Russia. Let’s imagine we have concentrated all our and foreign investments on the FEC. How many people are needed for implementation of this extensive model? The world is happy, but in Russia we would have to fire 2/3 of all employees. That is why we have to think how to innovate the FEC, which is needed by the world, for it would generate an “economy of knowledge” and be a motivating force for innovative development in other branches. If we look at the reform of the energy sector, especially of electricity, we will see a simple fact – prices have grown by 7-12 times, but insufficient investments were received. There is another important aspect – the twelvefold price growth didn’t lead to growth of energy effectiveness. This means that for our country price inflexibility of demand is very high, i.e. that there is no hope for a price growth causes any innovative and energy effective arrangements. It means that in Russia innovative arrangements would be caused by economic mechanisms rather than simply launching market prices for energy products. Of course, foreign investments would take place, because the world needs our energy resources. It depends on us that these investments be beneficial for us and not be focused on extensive development of resources and exporting them to the West.”
As for the procedure of achieving transparency, the president of the Institute for Energy and Financing, Vladimir Feigin, said: “It was a surprise, as it is thought that companies are huge and making them transparent is a great challenge. This is a global problem, because in the FEC we cannot have only small companies, there should be big conglomerates, considering the tough international competition. There is a question about their effective organization and management. Today radical reforms are taking place in the sphere of electric energy; less radical – in other branches. There is no standard approach, just as in any difficult affair. We should act considering the reality. At the initial stage of the transparency program we found out simple things: directors shouldn’t sign major projects with companies headed by the directors. The fact that such things happened previously means that nobody paid attention to it. But this is only the first layer, then many more new problems will appear.”
Commenting on the possibility of tariff growth for the population due to modernization, Feigin said: “I think the situation should be the opposite. Modernization is needed for promotion of effectiveness. If we follow old principles, effectiveness will reduce. Deposits are being exhausted, explosions are not rare. And we have no adequate response to them, it would be extremely expensive. Electricity prices grew dramatically, and now they are similar to prices in some European countries. In the USA electricity is partially cheaper than in Russia. But the energy sector shouldn’t shift its problems to consumers – industry and the population. We aimed to bring internal gas prices closer to the international rates, but at that moment the rates were rather low, now they doubled and tripled. So we should increase our prices too. But let’s look at our main rivals – they are not the developed countries of Europe, which are reducing energy demand, but dynamically developing countries, which create all the conditions for development of energy demand, including price lowering. These are the roots of our problems with China. They understand that if they act like the rest of the world, their advantage of having the cheapest products will be gone. We have reached a price and spending level that is sensitive for the economy. If launching new capacities is the most expensive in the world, we should make it cheaper. But here we face many obstacles; among them are high credit rates… It appears we are uncompetitive. I don’t say all problems could be solved through the FEC, but there is no systematic modernization plan in our country. We should develop it in a few months. The FEC provides 50-70% of the budget, and these problems cannot be solved, as under certain conditions this share might reduce dramatically. If spending is too high, the government couldn’t gain previous profit from the FEC. We should move to greater recycling, technologies that enable us to produce more “complicated” oil and gas without increasing spending.”
