DEFENSE MINISTRY AND RAO EES ROSSII START DIALOG

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After a long conversation with President Vladimir Putin in the Kremlin at the end of last week, Defense Minister Sergei Ivanov gathered journalists and announced that the Armed Forces would not pay for electric energy where the tariffs for it were raised higher than had been stipulated by plans of the Finance Ministry and the government. “The issue is over the debts of the Defense Ministry for energy for 2001, and in Kamchatka alone prices of electricity rose by 45%,” reiterated the minister. According to him, such growth “naturally was not taken into account” in budget assignments, and now the Ministry has no money to pay off the debt. Ivanov reiterated that the Defense Ministry was ready to discuss solving of this problem with RAO EES Rossii and the economic sector of the government, “but not at the expense of combat readiness and the standard of combat training of the Armed Forces.” Ivanov spoke decisively against taking of money from the Black Sea Fleet or any other fleet to repay the debt of, for example, the Pacific Fleet. “I will not do this, because then maintenance of the combat capability of the Armed Forces in general will become doubtful,” announced Ivanov.

The Minister made a statement of such a kind by no accident, not addressed so much to executives of the energy corporation as to officials of the Finance Ministry, who “unofficially” propose that the Defense Ministry pay off the debts for electric energy for 2001 “at the expense of current payments and re-allocation of money”, which would be assigned by the Defense Ministry from one clause to another. With his statement Ivanov actually supported the actions of military officers in regions who guard power stations with weapons in their hands and do not let representatives of RAO EES cut energy supply off garrisons to prevent deterioration of the combat readiness of their military units. Simultaneously the Defense Ministry sent a letter to the government pointing out that “mass cutting off of military garrisons from energy supplies may undermine the national security of the country.” No answer was received yet.

Meanwhile, representatives of the energy holding are also going to act decisively. According to CEO of RAO EES Rossii Anatoly Chubais, henceforth his company “will have to limit electric energy supplies to properties of the Defense Ministry until there is complete settlement of its debts.” At any rate, Chubais evidently does not hope to solve this problem in this way, and is attempting to reach consensus with the Armed Forces and the government. Chubais phoned Ivanov and Deputy Prime Minister and Finance Minister Alexei Kudrin and offered organization of a meeting of the government with participation of officials of the Defense Ministry, Finance Ministry and RAO EES “dedicated to assessment of the current situation related to payments for energy on the part of the Defense Ministry and to the finding of ways for a quick surmounting of the current crisis.” According to experts, the Finance Ministry is now flooded with money, and it is technically easy to transfer money to military units to pay off the debts. However, according to Deputy Defense Minister Lubov Kudelina, the problem is that the energy company and the Defense Ministry estimate the sums of debts for consumed electric energy differently.

Deputy CEO of RAO EES Andrei Trapeznikov reported to journalists that the overall debt of the Defense Ministry to the energy company amounted to at least 2.6 billion rubles. Kudelina disagreed with this sum, saying that in this sum the energy company included financial debts for electric energy consumed by enterprises of the defense industries, although they are financed under a quite different clause of the budget. Kudelina did not name the accurate sum of debts of the Defense Ministry to RAO EES, emphasizing that it would be necessary to calculate everything thoroughly and to pay off debts only then.

It is not known yet how long these calculations will take and whether they will make the energy company happy. It is possible that problems in relations between the Armed Forces and RAO EES will not be solved for a long time. Russia is testing a new mechanism for tax payments, and January showed that this mechanism was far from perfect still. According to new rules, companies (including RAO EES) should pay taxes to the treasury between the 20th and 30th day of each month. However, in January, many military units transferred no money during this period. The reason is that the Finance Ministry transferred money to the Defense Ministry to pay for electric and thermal energy only on January 24, and the assignment amounted only to 50% of the needs.

Tax agencies pressurize the energy holding, the energy holding pressurizes the military, and the Finance Ministry assigns money. At this point it is not very difficult to guess who is to blame.

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