The Russian mining industry has returned to the past 

During the 1990s, the Russian mining industry took a step in the direction of the Western industrial structure. With the opening decade of the 2000s, however, the mining industry has been organized into a form that corresponds to a surprising extent to the mining industry structure of the old USSR. This information emerges in the doctoral thesis A Return to the Past? An Institutional Analysis of Transitional Development in the Russian Mining Industry, by Veikko Kärnä, Master of Economic Sciences. This thesis study in the business economics, management and organization field shall be examined at Turku School of Economics on Friday, 1 June 2007.

The Russian mining industry was privatized at the outset of the 1990s. At the same time, the ministries working in the field in Moscow were suspended. For a moment in time, the mines were autonomic.

Nevertheless, the mines were quickly merged as part of the groups of companies owned by the oligarchs. These companies assumed the role of the branch ministries of the past. In addition, many of the groups of companies have returned to the vertical integration structure inherited from the times of the Soviet Union.

“In the vertical structure, the same company both produces the raw materials and processes them as end-products. For example, an electric company owns coal mines whose coal as produced is incinerated in the company’s own power plants,” Veikko Kärnä explains.

On behalf of his job, Mr Kärnä has been involved with the mining industry of the Soviet Union and Russia since the beginning of the 1980s. The theme of the study has arisen from Mr Kärnä’s own observations, which he wanted to test empirically.

Power is concentrated in Moscow

The majority of Russia's mines are located on the geographical periphery. During the autonomy phase in the 1990s, the mines got to decide for themselves with regard to, e.g., their equipment purchases. Currently the power has nevertheless been concentrated in Moscow.

“The mines have lost their possibilities to have any influence as part of the groups of companies," Mr Kärnä states. “These days, they have very much the same kind of production unit position that they had during the period of the USSR.”

In the decision-makers’ view, the Soviet Union period model is the right one

The development of Russia’s mining industry is reviewed in the thesis study via the ‘new institutional’ theory. This return to the old times is explained as the rebirth of an institution.

The structure of the old industry is, cognitively speaking, an institutionalized model. For a brief period, it was prohibited as a result of state resolutions, but was taken into use when the conditions once again allowed it.

“The decision-makers' cognition was that the 'right' structure for industry was a vertically integrated Soviet model which, given the suitable opportunity, would be reborn,” Veikko Kärnä reckons.

The doctoral thesis can be read at:
http://info.tse.fi/julkaisut/vk/Ae5_2007.pdf  

Additional information:

Veikko Kärnä
+358 40 503 3696, vekarna(a)gmail.com