* Prime minister Medvedev orders government to consider
regulated price freeze
* Reflects growing political concern over economy
* Plan would affect major gas, railways, power companies
* Would help lower inflation but negative for investors
By Jason Bush
MOSCOW, Sept 6 Russia may prevent regulated
prices from rising next year for the first time since 1999 as
President Vladimir Putin's government seeks to ease pressure on
household budgets in an economy that is barely growing.
A directive from Prime Minister Dmitry Medvedev published on
Friday asked ministries to look into the impact on the economy
and companies of a freeze in prices charged for state-regulated
services including gas, electricity and railways in 2014.
The Russian government is used to using its control of such
costs for political purposes. In a bid to boost electoral
support before Putin's return to the presidency for a third term
last year, it delayed rises in regulated costs for six months,
shortly after the first major street protests against Putin.
But it now faces a more difficult equation of how to reheat
an economy that has been battered by five years of financial
turmoil in Europe and, more fundamentally, by Russia's failure
to reduce its huge dependence on oil, gas and other commodities.
Opinion is divided on the impact of a tariff freeze.
Analysts at Uralsib said it "would result in significant
pressure on the financials of companies in the utilities sector"
and shares in power- and gas-related companies fell in Moscow on
Shares in gas monopoly Gazprom, once the world's
most profitable company but now under pressure from smaller and
more flexible competitors, fell 1 percent.
That will be of concern to the government, which owns a
majority of the company and draws huge tax revenues from it. But
any corporate fallout may take second place to the need to help
consumers who look like Russia's best hope of arresting Russia's
recent slide into economic stagnation.
Russia's population of 140 million, flooding into newly
constructed supermarkets and shopping malls in recent years, is
still more concerned with prices than anything else.
Polling shows more than half list household bills as a major
concern, compared to just 9 percent who mention the country's
patchy record on human rights and democracy.
Inflation, while coming down, will top six percent this year
while growth is expected to be less than two percent and that
risks at very least cooling consumer demand.
By quelling official price rises, Medvedev and Putin may
also be giving themselves more room for manoeuvre on other types
of stimulus for the economy.
The new head of the central bank underlined officials'
concern earlier this week by saying she would have to tighten
policy if the government did not show enough commitment to
bringing inflation down.
A senior government official cited by the Vedomosti
newspaper said that the proposed tariff freeze would enable the
central bank to cut rates and support growth.
In comments reported by Russian news agencies on Friday,
Finance Minister Anton Siluanov also swung behind the proposals.
He said that by lowering state procurement prices, a freeze
in regulated tariffs would make it easier for the government to
implement spending cuts proposed by the ministry. But he added
that it could also be negative for investment by "natural
monopolies", Russia's term for utilities chiefly including gas,
electricity and railways.
Medvedev gave the ministries until September 9 - four days
before the bank next meets - to draw up a new economic
development forecast for the period 2014-2016 that incorporated
maintaining tariffs at their 2013 levels, which the directive
said was "being considered".
Bank of America Merril Lynch estimated that a tariff freeze
would trim around one percentage point off inflation next year.