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second, no property would be exchanged for loans; and third, existing UES shareholders would receive pro-
rated stakes in any companies spun out of UES (Startseva 9/26/02). Given Chubais’ role in earlier back-
room privatization deals, and given the rumor at the time that RusAl stood to receive a large stake in a
hydropower plant in Siberia for about 1% of what UES had invested in it, the assurance was essential for
discussions of re-organization to proceed (Startseva 9/26/02). Based on those discussions, a new law on
the electricity industry and a new version of the UES restructuring plan received government approval in
2003 (Kramer 2003). Under the plan, UES would spin off its generators into about 10 separate companies
and distribute stakes in them among current UES shareholders. The federal government would administer
UES’s large-scale transmission capacity, while low-voltage transmission systems would remain under the
control of the smaller-scale regional generators. In the context of that system, the state would eventually
sell off its shares in the new, large generating companies and begin to deregulate the electricity industry.
Even as participants debated and prepared for the re-organization, however, well-placed actors tried to
grab what assets they could. Regional governments, for example, sought to pry large-scale generators out
of UES before they were incorporated into the spin-off companies. In Khakasiia, for instance, where the
Saiano-Shushinskaia hydro-electric plant played such a large role in sustaining the aluminum company
SaAZ, the governor pursued several legal gambits to take over the generator (Kramer 2003, 3). In addition,
several leading economic groups—including Gazprom, MDM, Interros, and Evrazkholding—won seats on
the UES board of directors in 2004 (“Gazprom” 6/30/04). Long before issues of how best to regulate an
electricity market could be decided, the Russian state and major economic actors would fight over the
pieces of the system itself.
Property in Russia thus continued to offer offensive and defensive muscle in conflicts with other
economic players, as well as potential access to political assistance. With those motives and opportunities
still in place, even major legislative reforms, financial shocks, or leadership changes were unlikely to
change the fundamental dynamic of the system. As Putin began his second term, the economic groups at
the top of the system struggled to regain their footing in that arena, while a varied collection of second-tier
groups lay spread out across the country. In that environment, the Russian economy continued to grow, but
the fundamental question remained whether entrepreneurs could shift their attention from a struggle for
property to a competition for customers. The answer in 2005 was, “Not yet.”
Convention