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Putin Dresses Down Chubais

President Vladimir Putin on Saturday gave Anatoly Chubais a public dressing down over last month's power outage, accused Unified Energy Systems management of incompetence, and called for an investigation into the electricity monopoly's tax payments and spending.

Putin's comments prompted two top managers at UES subsidiary Mosenergo to resign.

"I would like to draw the attention of the prime minister to the cynicism and obvious professional unsuitability of the leadership of Mosenergo," Putin said in televised comments at an expanded Security Council meeting, according to a transcript on the Kremlin web site.

Mosenergo general director Arkady Yevstafyev, a longtime Chubais associate, and his deputy Vladislav Nazin resigned later Saturday, UES said in a statement.

Power went out in large parts of Moscow, as well as in the Moscow, Tula, Kaluga and Ryazan regions, on May 25, stranding passengers on the metro, trams and trolleybuses and forcing businesses to close for several hours. A rolling blackout began after a fire and equipment failure at the Chagino substation south of Moscow late on May 24, and power was fully restored only about 40 hours later.

Chubais, who attended the meeting, came under attack over his leadership of the company, despite Putin's acknowledging that revenues had risen at the company since Chubais took over in 1998.

"We did not stop UES from appointing new people to key posts in the electricity system," Putin said, as Chubais turned red. "But ... it is not enough simply to be a good economist. ... One also needs to be a professional in order to understand the importance of each little cog in the country's huge energy system."

Timely repairs on four "cheap little" transformers, which cost 180,000 rubles ($6,400) each, would have averted the outage, Putin said, citing a report by the Federal Service for Ecological, Technological and Atomic Supervision about the accident.

UES had allocated the money but the repairs did not happen quickly enough, Putin said.

Chubais said after the blackout that he would not step down unless the company's shareholders asked him to, noting that the government was the majority shareholder.

Prosecutors are investigating whether any officials at UES and Mosenergo were guilty of criminal negligence.

Chubais is a founder of the pro-business Union of Right Forces party, or UES, and is credited with being the mastermind behind the country's 1990s controversial privatization program that transferred a large chunk of the country's wealth to a handful of well-connected businessmen.

UES board member Leonid Gozman said Saturday that the company would improve its performance. "The replacement of specific managers is just one small part of the efforts that will be made by UES and its subsidiaries," he said, RIA-Novosti reported. "As a result of these efforts, Russia's energy system will become more reliable."

Appearing to anticipate reports of antiquated equipment and a lack of investment at UES, Putin insisted that the company had the resources to modernize. "Just don't speak today about insufficient funding or lack of money," he said angrily, stating that UES had posted a net profit of about 55 billion rubles, or $2 billion, in 2004.

Putin also criticized the Industry and Energy Ministry for failing to control UES's activities and called for a financial investigation into the company that would answer how much it pays in taxes and how it spends revenues from the sale of noncore assets.

"How is it that major pieces of real estate, in Moscow, in the city center, end up with owners on Cyprus?" Putin said, apparently referring to the proceeds of UES asset sales.

Putin said he was "surprised" that Mosenergo had sought to hike electricity prices to prevent similar outages in the future.

"In my view, this is simply a form of blackmail designed to pursue group and corporate interests at the consumer's expense -- at the expense of the entire public," Putin said.

Mayor Yury Luzhkov said Friday that the blackout had inflicted at least 1.7 billion rubles ($60 million) in damages to the Moscow Oil Refinery and other large enterprises in the city, and said that officials had yet to calculate losses caused to small businesses and emotional distress suffered by residents.

In a letter to UES, Luzhkov said the damages bill also included revenues lost by the city's metro system and housing maintenance agencies, as well as environmental damage caused by discharges of untreated sewage into the Moscow River, UES spokesman Andrei Trapeznikov said Friday, Interfax reported.

Trapeznikov said that UES was ready to set up a joint commission with the city government to discuss the economic consequences of the accident.

Meanwhile, Andrei Malyshev, head of the Federal Service for Ecological, Technological and Atomic Supervision, said Friday that the agency had found no traces of sabotage at the Chagino substation, contradicting a claim made last week by Chechen warlord Shamil Basayev, who said he was responsible for the outage.

In the latest incident to hit power supplies, an electricity transmission station in North Ossetia was shut down Friday as a result of gunfire, Interfax reported. Emergency workers put out the fire that erupted at the station, but a backup station had to work in its place, the republic's energy utility said.

(The Moscow Times 06.vi.05)

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