Bloomberg News

Putin Orders Graft Probes at Utilities to Increase Transparency

December 20, 2011

Dec. 19 (Bloomberg) -- Prime Minister Vladimir Putin called for corruption probes at Russian utilities companies to raise transparency at state-run enterprises.

The energy and economy ministries should work with law enforcement agencies to determine executives’ holdings in affiliated companies and identify the ultimate shareholders of businesses whose ownership structure is unclear, Putin said today. Infrastructure companies and others including OAO Gazprom and OAO Sberbank should submit ownership information, he added.

“We must have absolute clarity and understanding on the ownership structure, real shareholders and beneficiaries,” Putin said during a meeting at the Sayano-Shushenskaya hydropower station in Siberia. “There are examples when real shareholders of sales companies aren’t known -- everything is hidden in offshore companies.”

Putin, who plans to return to the Kremlin in a March election, has vowed to crack down on graft, with Russia classified as the 143rd most-corrupt country out of 182 surveyed in Transparency International’s 2011 Corruption Perceptions Index. Preliminary probes by the Energy Ministry of 352 senior executives in the electricity industry have found that almost half were affiliated with commercial companies, while family clans controlled swathes of utilities networks in some regions.

Putin ordered tighter control of management at state utilities, criticizing related-party transactions involving repair and sales companies and demanding that managers and their families provide information about income and property ownership to the Energy Ministry. Conflicts of interest can bring about management changes, even in cases where the law hasn’t been violated, he said.

Putin also asked for Gazprom, Sberbank, development bank VEB, oil pipeline monopoly OAO Transneft, nuclear holding company Rosatom Corp., shipper Sovcomflot and OAO Russian Railways to disclose ownership at their affiliates within two months, according to a transcript of his speech posted on the government website.

“We may later extend this to other infrastructure spheres of our economy,” Putin said. “Bringing our national economy, its strategic industries, out of the offshore shadow is our priority for the coming years.”

--Editors: Andrew Langley, Alan Crosby

To contact the reporter on this story: Lyubov Pronina in Moscow at lpronina@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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