Russia renews promises for coal reform — Proposals include cash, mine designations, increased exports

Russian Prime Minister Yevgeny Primakov has pledged $780 million to the country’s battered coal industry as the first step in a new government restructuring plan.

The money will be used to pay wages owed to miners and to keep open mines in isolated communities. The funding is the beginning of a renewed effort of the federal government to breathe life into the moribund sector, said Primakov, who added that an equal amount would be made available later in the year.

According to the government, the most significant element of the restructuring is the creation of mine classifications in order to determine the distribution of funds. Coal mines in Russia will be categorized as follows:

* Economic — those that are granted preferred status for government funding; * Potentially viable — possible moneymakers dependent on additional funding; and

* Uneconomic — those that operate at a loss.

Regardless of receiving an unfavourable designation, no operations will be closed until the government has set aside enough money to assist towns in which mines (often the chief employer) are shut down.

The government finds itself in a difficult position with respect to the more isolated money-losing mines: it cannot afford to subsidize such operations; nor can it close the mines, since no other work is available. According to the country’s coal miners union, half of Russia’s 269 coal mines operate at a loss, with dozens more teetering on profitability.

For now, however, the mines will remain open.

The restructuring plan stops short of granting Moscow total control of the country’s coal operations, but it does give the government final say in how they are run. Among the proposals is the appointment of company board members to the departments of local government that report to Moscow on coal industry matters. This system is already in practice in the coal-rich Kemerovo region.

In return, local governments will have veto power over operating decisions made by those companies. Primakov hopes that similar agreements will be made in other regions.

Also on the table is a plan to boost production and export levels. However, the former is dependent on a $500-million loan from the World Bank, says Deputy Prime Minister Vladimir Bulgak.

New export deals are also being negotiated. Several producing regions are in negotiations with Germany to acquire supplies and equipment in return for exported coal.

Through these and other proposals, total coal production is expected to rise by to 290 million tonnes by 2005. Of that amount, 30 million tonnes will be available for export. Currently, the country produces 210 million tonnes, of which 21 million tonnes are exported.

However, those forecasts may prove overly optimistic given a low coal price and competition from more efficient Western producers.

Other proposals include the issuance of licences to producers, renegotiating railroad and other transport tariffs, and safety improvements.

Also under review are the creation of so-called “mini-mines,” in which small companies would work at economic deposits. Such cost-effective operations would attract increased foreign investment, said Bulgak.

Russia’s coal industry has been in a tumult since the mid-1990s, when privately owned producers became unable to pay miners’ wages. Many of the successive prime ministers appointed by President Boris Yeltsin promised reform of the industry, but it was only in 1996, when miners waged strikes and protests in Moscow, that portions of their wages were finally paid.

-With files from Interfax News Agency.