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Tackling natural monopolies proves a tough task

Russia’s three biggest monopolies – the companies that control gas and electricity production and supply, and the railways – need heavy investment and reorganization. President Putin is trying to push through change but he is dealing with “states within the state”.

       
No-one outside the railways ministry understands how
money is spent on the rail network

Despite a decade of economic turmoil Russians still have a standard-of-living safety net. They are clothed, few of them starve and everyone has a heated apartment. Without reform this won't last. Infrastructure built in the Soviet era is still propping up the economy, but Russia is living on borrowed time.


The infrastructure is slowly decaying. There has been virtually no investment in the fuel and energy sector or the rail network since 1991. The levels of production of gas, oil and electricity have all fallen over the past decade, although the production collapse does seem to have bottomed out. Unless there is massive investments in infrastructure it will begin to break down. And it could start happening within the next five years.


The government has woken up to the need to get on with restructuring Russia's natural monopolies, and the Kremlin realizes that the amount of funding needed is so huge that it will have to come from outside.



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