Washington Times, DC
April 25 2004

By utilizing utilities, Russia retains power

By Steve Gutterman
ASSOCIATED PRESS

TBILISI, Georgia – Several miles from the stately palace where the
czar’s envoy once governed Georgia is a nondescript office building
in a grimy industrial district.
Drab it may be, but for some Georgians, it symbolizes new Russian
power in their country, a land that spent nearly two centuries under
Moscow’s rule before becoming independent with the collapse of the
Soviet Union in 1991.

The building is the headquarters of Telasi, a Russian-owned
company that provides this city of 1.3 million people with
electricity – a precious commodity in a country where blackouts are a
part of daily life.
It’s just one of the tendrils of Russian economic influence that
reach across Georgia and the rest of the former Soviet Union.
Using pipelines and power lines instead of tanks and troops,
President Vladimir Putin’s Russia is seeking to strengthen its
influence over former Soviet republics at a time when the United
States and European Union are extending their presence eastward to
places that until recently were Moscow’s domain.
That change is highlighted by the entry of the three formerly
Soviet Baltic states into NATO and the European Union.
“Russia did not want, does not want and never will want to lose
its influence in the post-Soviet space,” said Ramaz Sakvarelidze, a
political analyst in Georgia, where Moscow has promised to close two
Soviet-era military bases.
“And now that its economy has not only gotten on its feet, but is
able to act outside its borders, Russia is replacing its military
levers of influence with economic structures.”
Telasi is a case in point, he said.
Russia’s state electricity monopoly, Unified Energy Systems
(UES), bought a controlling stake in the Tbilisi utility last year
from the U.S. power company AES.
Georgian politicians protested the deal would give Russia a
powerful political lever over their country. Russia already
controlled nearly all natural-gas supplies to Georgia, where steam
heating delivered to entire city neighborhoods is only a memory and
many people rely on gas-fired heaters to warm homes in winter.
Georgia hopes a U.S.-supported natural-gas pipeline from the
Caspian Sea to Turkey will ease its dependence on Russia, but it’s
not expected to be built before 2006.
UES chief Anatoly Chubais flew to Georgia last August and sought
to reassure authorities over the Telasi purchase, saying the company
had no political goals and Georgia’s electricity supplies would be
secure.
But critics questioned the company’s motives for buying a utility
whose chances of making a profit are diminished by decrepit
equipment, corruption, poverty and what U.S. Ambassador Richard Miles
called “an innate dislike on the part of Georgians to pay for
energy.”
Mr. Miles said the American company decided to sell because it
couldn’t afford “the hemorrhaging of money.” But he said the issue of
why UES bought Telasi was “a good question.”
UES is clearly trying to expand its presence in former Soviet
republics, a campaign Mr. Miles said may be motivated by the simple
desire to grow and by the hope of future profits. “What other
political motives there might be, I don’t know. You’d have to ask Mr.
Putin and Mr. Chubais about that,” he said.
Yevgeny Volk, head of the Moscow office of the Heritage
Foundation, said there is no secret to UES’s activities abroad.
“It’s practically part of the state apparatus, and naturally, the
policy it pursues is state policy – and that is to strengthen
Russia’s position in the zone traditionally considered its sphere of
interest,” he said.
UES, which exports power to countries from Norway to China, says
its foreign business is coordinated with the government and conducted
in the interests of its shareholders, the largest of which is the
state. It says company experts even advise the Foreign Ministry on
policy.
Mr. Volk said UES and other Russian companies with close ties to
the government are trying to acquire property in former Soviet
republics “and then use that property as a political lever to
influence the situation in those countries to Russia’s benefit.”
Mr. Sakvarelidze and other analysts said that will allow Moscow
to influence personnel and policy decisions in those countries,
shaping their future in line with its own interests.
In February, Russia’s state-connected Gazprom briefly halted
natural-gas supplies to Belarus during a dispute over Russian efforts
to gain control of Belarusian industrial enterprises, including the
pipeline company that relays Russian gas to Europe.
In December, the Russian state-owned oil pipeline monopoly,
Transneft, stopped deliveries to the Baltic Sea port of Ventspils,
Latvia. Latvian officials said Moscow was arm-twisting as part of an
effort to buy the Latvian government’s stake in the company that
loads oil onto ships bound for the West.
Also last year, Armenia ceded control over its only nuclear-power
plant to UES in a bid to escape debts to Russian energy suppliers.
Mr. Volk said Russia’s activity is a reaction to increasing U.S.
and European influence in the region.
“There’s no question of returning these countries to Russia or to
some sort of Soviet Union. Everyone understands that’s impossible
politically,” he said. “But to bind them more closely to Russia and
provide Russia with advantages in this economic space … this is a
completely realistic policy.”