Columbia International Affairs Online: Working Papers

CIAO DATE: 02/2011

How to succeed with a thousand TWh reform?

Laura Solanko

January 2011

Finnish Institute for International Affairs


As was the case in most developing and transition countries, Russia’s electricity sector was dominated by a vertically integrated, state-controlled monopoly. The common problems of ageing infrastructure, large distribution losses, very low retail tariffs, inefficient management and increasing tightness of supply encouraged many countries to embark on large reforms to liberalize their power sectors during the 1990s. In Russia, the reform started somewhat later, but to the surprise of many it has since proceeded very swiftly. This paper provides an overview of the reform process and an update on the current situation in late 2010. In particular, the paper situates the Russian reform in the international context by comparing it with the experiences of other countries. Further, the paper strives to underline the importance of the reform for the Russian economy at large – both as an inevitable step to avoid a looming energy crisis and as a striking example of implementing a liberal, large-scale economic reform in Putin’s Russia.