Russia plans to invest $20 billion USD in water management and infrastructure by 2020. The pledge was made by Prime Minister Vladimir Putin last month following an accident at the country’s largest hydroelectric plant which claimed the lives of nearly 100 workers. The accident occurred when a surge of water burst through Soviet-era turbines and flooded the turbine room where the workers were located.

The water sector in Russia has suffered from chronic underinvestment for years, with much of its infrastructure dating back to Communist times. Last month’s accident was a major wake-up call to the country’s leadership, who now realize that the status quo is simply not an option. “The recent tragic events at the Sayano-Shushenskaya hydroelectric plant showed with all clarity how much more we should do to increase the reliability of technical constructions on the whole, and the hydrotechnical ones in particular,” commented Putin.

In 2008 the Russian government put forward a plan known as the “Clean Water” program as a major overhaul of the country’s water and sewage infrastructure over the next 10 years. It was estimated at the time that as much as $459 billion USD would be required to complete all the necessary upgrades, refurbishment and new construction. A fall in oil prices and the global economic slump put a damper on the plans, but the Sayano-Shushenskaya accident hastened the authorities to act.

It is unlikely that the country will ever be able to find the $459 billion for all the required work, but the $20 billion USD pledged by Putin is at least a start. The Clean Water program sets out ambitious goals and highlights the magnitude of the task. Public access to water and sewage networks is still relatively low in Russia compared to other European countries, and there has been little progress in improving the situation since the end of Communist rule.

Most water infrastructure suffers from frequent breakdowns, consumes too much energy and experiences high levels of water loss. The effects of poor drinking water quality and the indiscriminate discharge of untreated industrial effluent into rivers and reservoirs is also a major health concern. Finding the necessary capital will be critical to implementing the required investment. Water tariffs in Russia are very low and are barely sufficient to keep existing services going without state help, let alone invest in new projects.

Accepting that domestic funds will be insufficient, Putin has therefore pledged to open up the water sector to private investment. “Apart from state funding, we need to create conditions for private sector inflows,” he said.

Even before the Sayano-Shushenskaya tragedy there was a move towards privatization, but Putin’s commitment to private funding is the official “seal of approval” and means the Russian water sector now offers potential opportunities for foreign investors.Russian authorities recognize the importance of private sector involvement and have been working on amendments to the concession law to promote and facilitate private investment in the utility sector.Water utilities are already looking at alternative ways of increasing effectiveness, reducing operating costs, reducing water loss and increasing energy efficiency.

Mikhail Nikolskiy, Executive Director of the Rosvodokanal Group – one of Russia’s leading utilities – said, “Crisis is a good time for increasing effectiveness. That’s why engineering companies attempting to reduce costs have a good chance in Russia…it is necessary for utilities to focus on energy efficiency and water losses.”

In February this year Igor Gorchakov, an industry analyst at law firm Baker McKenzie, put the current Russian infrastructure situation bluntly when he said: “Planes will start falling a bit later, but the hot water pipes will start bursting sooner. Just think about it – most of these things have not been fixed since Soviet days.”

His prediction was frighteningly accurate – except that the “burst water pipe” was something far bigger – a burst turbine hall full of people. Russia possesses one-third of the planet’s water resources – second only to Brazil and Canada. Lake Baikal in southern Siberia is the world’s largest freshwater lake and contains 20 percent of global freshwater and 80 percent of Russia’s freshwater. The country contains five major drainage basins, Europe’s longest river and 10 million square kilometers of permafrost. It has been suggested that all this water, even though much of it is in remote and inhospitable regions, could one day become a strategic asset for the country.