The Privatization of the Russian Coal Industry: Policies and Processes in the Transformation of a Major Industry

Abstract

In the early 1990s the Russian Federation implemented mass privatization with swift ownership changes in many industries. A notable exception was the coal sector, one the world's largest, which was in deep crisis and unable to function without massive subsidies. The government undertook a far-reaching program of sector restructuring, closing heavily loss-making mines and cutting subsidies. The positive impact of the restructuring program led to a slow but sustained improvement in the coal industry's attractiveness to private investors. By the end of 2001, some 77 percent of coal output was accounted for by private operators.

Artemiev and Haney provide an overview of the privatization of the Russian coal industry. They review the salient aspects of the government's privatization policy as it evolved over the years and look at the reasons for the successes and pitfalls encountered along the way. The authors describe in detail specific procedures and methods of sale. They provide a profile of the new owners of the industry and reasons for a different approach to privatizing an industry with a record of serious social, environmental, and labor problems, and look at the risks ahead.

This paper - a product of the Private Sector Advisory Services Department and the Infrastructure and Energy Department, Europe and Central Asia Region - is part of a larger effort to evaluate Bank interventions that have a significant private sector development component.