One of the best things about New Year's Eve will be that it will end the stream of nonsense forecasted about Y2K-induced chaos in Russia. It is unfortunate that the media relay with so little discernment the exaggerated warnings-mostly from official U.S. sources like the CIA and the State Department-about disruptions in utilities, financial markets, health care and more. An example is the article recently published in The Moscow Times headlined "Embassies, Expats Plan Y2K Mass Exodus," published Nov. 2. Some of the emergency measures mentioned in the article-such as draining radiators or using solar-powered radios in the middle of the Russian winter-are so absurd that they should disqualify the discussion outright. The focus of Western Y2K anxieties is the Russian power system, an extended grid covering the whole country. Any prolonged power blackout, Western analysts assert, could start a chain reaction across the utilities, halting the operation of heat, water and gas services as well. These warnings, however, overlook two fundamental points: 1) Most of Russia's technology in this area is not based on time-dependent computers, and 2) Russia deals with disruptive problems like the forecasted Y2K blip all the time. What for the West is the exception is here the rule. In any power system, several coinciding factors are required to initiate a Y2K blackout. Different system components must first recognize that midnight, Jan. 1, 2000 has arrived. Then they have to decide to take action, like disconnecting themselves or the equipment they control. Finally they would have to communicate this situation to other parts of the system so that they could react. In such a complex system, network failures of this kind can multiply and interact in a way that is impossible to predict. For heavy power equipment like turbines, transformers and power lines, date and time are irrelevant. The only components that may experience Y2K failures are control and safety devices and communication links. Unlike Western utilities, most of Russia's control and safety devices are analog or electromechanical, not digital. Date and time are only an issue for digital equipment. So, though Russia's safety and control devices are obsolete, they are definitely not Y2K-sensitive. As for the digital control systems, a bit of differentiation is in order. Control systems in Russian utilities actually "control" very little. They are little more than monitoring systems, built on old Soviet-era computers and integrated with more contemporary PCs. At best, they display what is going on in the network, but are not programmed to take any automated actions. Even if they were, there are no remotely controlled devices to carry the actions out. In fact, the Russian power system is run mostly manually. With few exceptions, the only remote control is when instructions are given over the telephone to people on shift duty who are close to the buttons. Even the digital communication between Russian power utilities is so primitive that it can hardly be affected by the Y2K bug. There is no standard format for data exchange and the lines are patches of several different solutions. The propagation of normal data on such lines is already a major challenge: The Y2K bug has almost no chance. The only truly Y2K-sensitive devices are computer microchips, which, at midnight, might think the equipment they control has run beyond preset maintenance limits. At that point, they would simply switch the equipment off. (There is, by the way, no such thing as maintenance in Russia anyway.) Here we should note that Y2K-related mythology is based on the assumption that clocks that aren't connected to each other all run synchronously. The microchips that will supposedly halt elevators in the West and bring down the power system in Russia have no way of knowing when midnight strikes. For this they need to be synchronized on some external time reference like global positioning satellites. Then, the devices have to have an internal clock that records the date since the time the power was first turned on. And if their clocks run too slow or too fast, the Y2K breakdown could take place at any time between now and next spring, but definitely not all at once. If Y2K failures do occur in Russia, they will appear simply as a higher than usual incidence of malfunctions of non-essential computer equipment for a period of a few weeks around the new year. Russians will not notice anything unusual, as the malfunctions will be filtered out, as is customary, by manual action. The self-anointed Y2K experts can be excused for misunderstanding these basic facts because probably none of them has ever set foot in a Russian utility. The Y2K problem appeals to management and organizational consultants because it is vague and trendy. Plus, persistent alarm about the bug in Russia also creates an environment where expats can command higher wages in the form of hardship pay for predicted inconveniences as a result of the bug. Also, management and consulting firms who deal with the problem are able to talk a lot and deliver "vaporware" diverting attention from other work that requires real solutions to real problems. In this respect Y2K provides a convenient and elegant excuse. The most pressing issues facing Russian utilities-like low efficiency in power generation, pollution, aging and unsafe distribution networks and the establishment of regular financial flows-remain unresolved. The same consultants who are so keen to discuss Y2K keep a safe distance from these problems, which they are incapable of addressing. Let us hope that after January, when attention to the Y2K bug diminishes, more resources will be available to deal with Russia's real power sector problems. Gianguido Piani works in the energy sector in St. Petersburg. He contributed this comment to The Moscow Times. Copyright 1999 THE MOSCOW TIMES all

-- Anonymous, November 11, 1999

Answers

My guess is that the contributing editor of this article is from Italy who imports a lot of Russian gas. One third of the Russian electricity comes from Gas. Gazprom appears to be beyond FUBAR at this time. Every press release says something different. Russia today is an english version of Russkie propaganda machine.

From something I posted earlier on TB2K: I hesitated to even make this post. I want to clarify off the bat that this is only one man's opinion. I'm a crude oil and strategic planning analyst for a Fortune 500 refiner. That's it. I don't claim to be a trader god and I don't see the future. I do however make educated guesses for a living. This is my educated guess on Russia as regards the Y2K problem, specifically Oil and Gas. Additionally, I have added three articles at the end which came out today which were relevant to this analysis. Do your own research with the links at the end, search the reports for Russian progress, and tell me you don't reach the same conclusions. All of this information is for educational and research purposes only: >From Russia With Love

"This is a management problem every bit as much as it's a technology problem. And the biggest mistake you can make if you are a CEO or a responsible manager is to say, 'My IT guy will fix this.'" -Senator Bob Bennett (R) UT

Aside from government readiness, Russia faces major Y2K challenges in key infrastructure sectors including telecommunications, energy, banking, and government services. In June of 1999 it was projected that Russia was likely to experience a month of disruptions in financial markets, two months for utilities and healthcare, and up to three months of turmoil in transportation and telecommunications. INVESTIGATING THE YEAR 2000 PROBLEM: THE 100 DAY REPORT Senate Special Committee on Y2K Problem

After years of decline, Russias flirtation with capitalism has now reached a critical juncture. The experiment with Western-style capitalism has collapsed. And the invention of Russias peculiar  and wild  brand of capitalism has ended in outrageous scandal and popular discontent. A decade worth of foreign aid and investment has left Russia a pauper nation.

The best global intelligence agency on the world wide web.

Overview/Main Points Russia will experience significant Y2K caused disruptions to energy and other industrial sectors.

Experts all agree that Russias late start on remeditaion will result in severe disruptions.

Russias current socio-economic chaos is not a convenient excuse for denying the seriousness of their situation, but rather a catalyst for the impending disaster.

Russia is/was a superpower. The collapse of this country will not go unoticed in the world economy and will have severe reprocussions for those countries dependent upon Russian energy and materiel. The collapse will likely result in a reversion to old line communism within Russia.

The following countries will experience severe reprecussions as a result of Russian dependency in order of decreasing magnitude: Ukraine, Czechoslovakia, Poland, Germany and Italy.

What the experts have to say:

Y2K failures will occur before and as the date rollover approaches, peaking on 1 January and persisting well beyond that. In some countries, such as Russia, it will likely take a significant amount of time to overcome Y2K failures. Russia and Ukraine are particularly vulnerable to Y2K failures. They got a late start in remediation and lack sufficient resources to identify and correct problems- virtually guaranteeing that the countries will suffer economic and social consequences for some time. Both countries have old capital stock, much of which has not been upgraded since the Soviet era. They are further impeded because of their perception that a limited computer dependence largely "protects" them. Areas of greatest risk are strategic warning and command and control, nuclear power plants, the gas industry, and the electric power grid. Congressional Testimony of Larry Gershwin National Intelligence Officer Central Intelligence Agency October 13, 1999

Russia is at great risk. China and Russia are both considered at accelerated political and economic risk due to Y2K failures. Nick Gogerty, International Monitoring. Congresional Testimony October 13, 1999

"The Year 2000 risk for Russia is in the grid," he told reporters. "It's not inconceivable that what we are going to do by late summer or early fall is look at whether we shouldn't provide direct aid in terms of backups such as batteries and generators John Koskinens comments Chicago Tribune April 1999

Right or wrong computer problems on the eve of the new millennium do not rank high on their scale of concerns Col. Stanislav Lunev, highest ranking military officer ever to defect to the US October 13, 1999

However 21 countries slipped further behind in their efforts and the vast majority of are countries still showing significant risk of infra-structure failure. The most disappointing country was Russia. Senate 100 Day Report, Senate

Russian Industrial Chaos + Y2K = FUBAR

We need only look to newswires for confirmation of the fact that Russia is indeed mired in an economic and sociological chaos which is unparalleled in this century. The situation in Russia is unsustainable notwithstanding any potential Y2K impacts. The events of this past week in Armenia and Chechnya only serve to underscore the coming cataclysmic resolution of Russian difficulties. Russia is a country where prime ministers are shot dead in parliament, explosions in downtown Moscow kill innocent civilians daily and 90,000 troops are massed outside Chechnya waiting to kill their fellow countrymen. Do you really think for a second that this country in its current state could possess the wherewithal to remedial a complex technology problem such as Y2K? The answer is no. The problem is compounded by the fact that the natural resources became top prizes in contest for power within Russias twisted economic environment where domestic sources actually barter for crude oil and must pay prices 10% above exported values. Extreme premiums are available for anyone who has cash, but that would be a small minority indeed. The headlines below show the depth of the problems within the Russian Energy industry. There is precious little hope that these companies have successfully remediated anything.

Gazprom: Operates one of the largest gas pipeline systems in the world with a total length of 373,000 kilometers of pipe controlling 95% of Russias natural gas accounting for approximately 25% of the countries tax base. The distribution network passes through 1,300 cities and 16,000 towns within Russian borders. In total about 1/3 of Russian power is produced by Natural Gas making Gazproms success critical for Russian infrastructure. In September the company announced that 9,000 of its PCs were not Y2K compliant and would need to be replaced. They stated that the bulk of them would be replaced by October and that they would modify the rest. This company lives on the edge of economic and political chaos daily. At this time they are operating over 23,000 miles of line which are in need of repair, 13,000 of which operate at reduced rates already due to the extensive corrosion theyve suffered. Do you really think theyve spent good money on Y2K when they cant even repair their pipes?

Some recent WSJ headlines: Gazprom Investors Want Recompense For Any Share Loss Russia Examines Possible Theft Of $20 Million in Gazprom Stock Russia Tightens Grip on Monopolies As Parliamentary Elections Approach October 1999 WSJ Transneft: Owns the entire 31,000 mile crude oil pipeline system and is responsible for all crude and product movements in Russia. They are one of Russia's biggest hard- currency earners, and control of the company has become the object of an intense political fight in run up to the December parliamentary and June presidential elections. Recently, a new official was installed at the company by the government in an effort to gain further control over the valuable entity. Recently some of Yeltsins cabinet members decided they wanted a new president for Transneft. They promptly made the announcement was made that the old president was out, and sent three hundred armed troops who had to cut through office barricades using chainsaws to get the president elect in to his new office. I can just see his next memo, comrades. let me just say I have appreciated your warm Russkie style velkomme and all your heartfelt anti-personnel mines.. now that the armed troops are being reduced around the perimeter, let us get down to business with this Y2K issue. Such is the state of affairs at Transneft.

Recent Fox News Story: Oil company president installed with help of troops 10.25 a.m. ET (1425 GMT) September 16, 1999

Oil company president installed with help of troops

10.25 a.m. ET (1425 GMT) September 16, 1999 MOSCOW  Russian troops used chain saws to force their way into the headquarters of the Transneft oil pipeline on Thursday and install the newly appointed head of the company in his office. Several dozen Interior Ministry soldiers were dispatched to the companys offices after supporters of a management team that was ousted last week attempted to block Transneft's new chief, Semyon Weinstok, from entering his office. Andrei Vazhnov, a spokesman for ousted Transneft President Dmitry Saveliev, said the troops stormed the building and used chain saws to break down a door and escort Weinstok to his office. Saveliev was fired last week.

According to a spokesman for the Fuel and Energy Ministry, Saveliev's management team had cost the government about $30 million in losses.

However, Saveliev said his dismissal was illegal, because the government didn't call a shareholders' meeting to consider the move, which would have taken 45 days.

Why You Should Care Russia: The worlds largest exporter of natural gas, 60 billion cubic feet per day , 30% of the worlds gas Second largest exporter of energy and petroleum in the world Russian net oil exports averaged 3.1 million barrels per day in 1998 The holder of the second largest coal reserves in the world The world's second largest energy consumer

Who will be affected? Most of Russia's oil exports are destined for European customers, including Germany , Italy and Spain

Germany-most of its oil imports and 30% of its gas imports come from Russia

Italy imports one third of its gas from Russian sources.

Poland imports most of its crude and 80% of its gas from Russia.

Ukraine currently imports nearly 80% of its oil, almost all of which comes from Russia.

Ukraine is the main transit route for Russian natural gas shipments to Europe.

Conclusions I would like to say I think everything will be OK in Russia this winter. Id like to say that the implosion of their infrastructure wont affect the economies which are dependent upon them or ripple through the rest of the world Economic Ebola Zaire, but I simply cant. The regional infrastructure failures will be extremely bad, and the catastrophes they will inevitably engender will likely cause a return to hard line communism within the FSU. If you have anyone you care about in this region, I would strongly encourage them to come to the US if possible.

Russian oil and gas exports will be fully disrupted for 2-4 months minimum, resulting in a net loss of crude exports between 192 million and 384 million barrels of oil. The gas shortages will result in infrastructure failures in Russia and parts of Eastern Europe. The disruptions in crude oil will result in upward price pressure, mostly in the North Sea grades and Mid East, WAF to a lesser extent. I am uncertain of the price impact on crude except that it will be severe upward pressure from this area. The situation will be impacted by other areas, as well as spare production capacity. If I had to hazard a guess, it would be that Dated Brent will crest $24 dollars per bbl in Jan based upon this one area of disruption, it could go higher depending on other disruptions around the globe. Gas prices will disconnect, as the shortages become acute. Gas oil will most likely spike as utilities switch over where they can.

July 1999 Russian Oil and Gas Exports Fact Sheet Here's the addresses: uly 1999 Russian Oil and Gas Exports Fact Sheet http://www.eia.doe.gov/emeu/cabs/rusexp.html

September 1998 Russia: Energy Situation Update http://www.eia.doe.gov/emeu/cabs/russar.html#TAB1

Caspian Maps and Graphs http://www.eia.doe.gov/emeu/cabs/caspgrph.html#TAB3

Germany, Ukraine, Italy, Poland and Czech http://www.eia.doe.gov/emeu/cabs/germany.html

http://www.eia.doe.gov/emeu/cabs/ukraine.html

http://www.eia.doe.gov/emeu/cabs/italy.html

http://www.eia.doe.gov/emeu/cabs/poland.html

http://www.eia.doe.gov/emeu/cabs/czech.html

Gershwins testimony http://www.senate.gov/~y2k/hearings/991013/st991013gershwin. htm

Other International Testimony http://www.senate.gov/~y2k/hearings/991013/

Senate 100 day report http://www.senate.gov/~y2k/documents/100dayrpt/

Gogertys testimony http://www.senate.gov/~y2k/hearings/991013/gogerty_intl.pdf

Y2K Russian Style - Stanislav Lunev http://216.46.238.34/articles/?a=1999/10/26/34625

Koskys Statements http://chicagotribune.com/version1/article/0,1575,SAV - 9904220173,00.html

-- Anonymous, November 11, 1999