Posted on 07/21/2004 11:22:13 PM PDT by hedgetrimmer
China will not insist Russia raises domestic gas prices before allowing it into the World Trade Organization, the Economic Development and Trade Ministry said Wednesday.
"China will no longer demand that Russia raises its internal gas prices," said a spokesman for the ministry, which leads Moscow's trade negotiations.
Russian gas monopoly Gazprom supplies gas to domestic industry at around one-fifth of world prices, creating a headache for overseas competitors and a potentially major obstacle in Moscow's decade-long effort to join the WTO.
By reaching agreement with Beijing on gas -- a vital ingredient in a wide range of industries -- Russia moves a step closer to winning support for its WTO membership from another major trading partner.
Russia wants to wrap up WTO negotiations with some 80 trading partners by the end of the year, and cleared a big hurdle by striking a deal with the EU in May.
Washington has suggested that it will also look favorably on the application.
Russia argues its vast reserves of gas are a natural competitive advantage, but in its deal with the EU, its biggest trading partner, Russia agreed to a gradual price rise for its industrial customers.
Under the EU deal, Moscow said it would raise gas prices to $49 to $57 per 1,000 cubic meters from the current $27 to $28 by 2010.
It certainly doesn't look as though any free trading is going on here at all.
WTO news ping.
But they want access to Russia's economy, so no matter how insecure their intellectual property is, and no matter if they make knockoffs of their products, and no matter if they pirate the CDs, they'll let Russia in anyway...
***
'Dark Cloud' of Piracy Hangs Over WTO Bid
Combined Reports GENEVA -- The United States and other countries negotiating the terms of Russia's membership in the World Trade Organization said Friday they do not think the government is doing enough to fight counterfeiting and piracy.
The issue is "a very dark cloud hanging over Russia's accession," one U.S. delegate told a meeting of the WTO working group, officials said.
Japan, Australia, Norway and Switzerland also expressed concern at Russia's stance on intellectual property issues at the WTO working group negotiating its entry to the 147-member body, trade officials said.
Governments said they were particularly worried about a law that allows equipment used for producing pirated CDs and other goods to be resold after it is confiscated by the police. The equipment should be destroyed, they said.
Concerns were also expressed about the lack of enforcement of data protection laws and the poor protection of commercial secrets.
Russia first applied to join the WTO -- the body that sets rules on international trade -- in June 1993, but the country only started making major efforts to fulfill the conditions of membership when President Vladimir Putin came to power in 1999.
The Russians have had to embark on a major set of legislative reforms to bring them into line with WTO rules, including producing a new Customs Code. Other major issues include agriculture, easing access for foreign banks and insurers, and lowering tariffs on airplane imports.
http://www.themoscowtimes.com/stories/2004/07/19/042.html
Use your brain and beat piracy...not and loose...oh and not like China, Russia exports technology and music too.
Personally, though...to hell with WTO and the rest of world socialism...Russia does not need to be in club of crooks. Better to bargain individually with other nations.
Free trade is all about removing government tinkering with free market forces.
China is right. Russia is wrong.
You are right. Preventing Russia from falling into WTO trap was a huge mistake on the side of international reform minded oligarchs.
Hey - the purpose of Russian policy is to serve the interest of Russian nation and not the interests of free traders or reform minded oligarchs like Khodorkovsky or Al Capone.
Eat your heart out.
Yeah, well that's just stupid. Protectionism is all about protecting the interests that funnel money into the coffers of the politicians who promote it.
I am curious - how the lower prices of oil enrich politicians or reform minded oligarchs (big thiefs/kleptocrats))? I would think that keeping price higher would do it.
If Russia is charging a fair price in their internal market, how is it playing fair with them to force to raise their internal prices? Isn't this like Wickard vs. Filmore on a national scale?
And this current low pricing could be advantageous to all of us who are paying inflated prices for electricity this summer: it turns that the U.S. wants to import some of that cheap natural gas in the form of LNG: Here's an excerpt from a 2003 speech "Remarks at the 'U.S.-Russia Energy Summit Executive Seminar': U.S.-Russia Energy Cooperation - In Our Mutual Interest" by the U.S. Ambassador to Russia:
Murmansk could also be a hub for Russia gas exports, given the sizeable gas reserves in the Arctic, both onshore and offshore. We are pleased that companies, analysts and government officials are beginning to look at prospects for Russian exports of liquified natural gas (LNG). We see a growing demand for LNG worldwide and, in particular, in the United States. It is no longer a "pipe dream" - pun intended - to imagine a world market for LNG, with multiple buyers and sellers. Russia - particularly a Russia with a restructured gas industry featuring many producers and sellers - would be well placed to thrive in such an environment. We can easily envision sizeable LNG exports from Murmansk and Sakhalin being sold on both U.S. coasts and in both Asia and Europe.
And here's an excerpt from another, commercial article last year:
Russians and Americans
In the heady days of the presidential friendship between Bush and Putin, American and Russian energy companies held energy summits to make nice and see what they could offer one another -- a spirit of cooperation that could be paying off for companies in both countries.
At the second annual summit in St. Petersburg, ConocoPhillips and Russian gas company OAO Gazprom set the stage for a $10 billion deal that would enable ConocoPhillips to transport liquefied natural gas (LNG) from Russia to the U.S. The idea is not a new one for ConocoPhillips or its competitors, but a joint operation with the Russians is appealing since shipping LNG from Russia's Far North would be cheaper than from the Middle East, according to Gazprom's deputy chairman, Alexander Ryazanov.
In a shroud of secrecy that seems the Russian way, both sides have declined to confirm the deal. A ConocoPhillips spokesperson would only concede that a discussion with Gazprom had occurred. And it couldn't have happened at a more opportune time.
So maybe it's not such a bright idea on our part to insist that Russia to artificially jack up its natural gas prices.
Unless, of course, you are suggesting that we do it as a trade tariff to protect our own domestic natural gas industry? :-)
True, that is beginning to change and within 15 years or so with the construction of LNG terminals and tankers we'll see a world natural gas market. America will be importing natural gas from South America, the Middle East, and Russia.
The complaint against Russia is that it is unfairly subsidizing industries by selling them gas at prices below what they sell it to non-Russian customers. Elimination of such subsidies is a chief goal of the WTO. It's not free and competitive trade when one side artificially lowers the cost of the goods being traded. Russia is doing that by lowering domestic manufacturing costs.
I don't think you'll have reason to celebrate Russia selling us cheap gas. They'll sell it to us at whatever our current domestic price is, just like they're doing now with their exports to Europe.
Do you have any figures to show that Russia is actually charging less than production costs? My check of our figures shows that natural gas has sold for the same price range (in 1996 dollars) in the U.S. On the face of it, I don't see why Russia, which has enormous gas deposits, might not have similiar, or even better, price ranges for production.
If the complaint actually is that Russian customers simply pay less than what others pay, well, this happens in virtually every industry that I am familiar with. If we generally insisted that domestic customers pay the same as international customers, the book industry, for instance, would have to really jack prices up. Buying a U.S. published book in Tokyo generally runs you twice what you pay here for the same book.
Differential pricing is particularly prevalent in the energy business. Commercial customers pay far more per unit for natural gas ($6.59 per 1000 cubic feet in year 2000) than industrial customers ($4.45 in 2000), who pay more than electric power plants ($4.38).
In order to call it a subsidy, I believe that you need to show that it is being sold below production costs, not just below whatever price you want to compare it to.
You point out that we probably won't see any significant savings since Russian LNG will likely sell for our market prices. Will you insist then that they raise natural gas prices in Russia to match ours once they enter our market?
Would you say that if the Russian price were not raised, then the Russians receiving gas more cheaply are somehow being subsidized? Just because Random House sells the same book for twice the price in Tokyo that we do in New York, are we being subsidized somehow? Should we immediately double all of our book prices to bring them into line with international prices?
The answer is clearly not. I assert that it is subsidized if it is being sold for less than cost (and if in fact iff the producer is being compensated ("subsidized") by another party, such as a government, for their loss.)
Your own point later is that we pay our market price, not the home country's price (I wish we could get oil at the same cost as Saudis or Iraqis do.) If the Russians can produce natural gas and sell it for less, then your point that customers will pay the market price, not the home country's price, doesn't mean that the home country is somehow receiving a subsidy unless you can also show that the home price is lower than production (and it would be even better if you could show that there was some compensation somewhere for taking this loss.)
If we do accept the position that home country folks need to pay what international customers pay for the same product, get ready to pay Tokyo prices for beef (not that we can ship any to Japan until we starting testing for BSE). Goodness knows we wouldn't want to be subsidizing our beef producers by Americans somehow paying less for steak than a salaryman in Tokyo.
July 07, 2003 Posted: 15:04 Moscow time (11:04 GMT)
VORONEZH - The low domestic prices on natural gas “pose a threat to Russia’s national security”, the deputy CEO of Russian gas giant Gazprom Alexander Ryazanov told reporters Friday.
“Domestic gas sales are unprofitable for Gazprom: the losses come to 8.5 billion rubles a year,” he said, though he didn’t explain how this was a threat to Russia’s security.
Now the average domestic natural gas price is 489.94 rubles per 1,000 cubic meters, while the loss from domestic sales is at 25.6 rubles per 1,000 cubic meters of gas, Gazprom CEO Alexei Miller said June 27.
According to Russia’s power sector development program, domestic gas price is planned to rise to U.S. $50 per 1,000 cubic meters by 2010, Ryazanov said Friday.
Gazprom plans to reach the break-even point in domestic gas sales by hiking the average domestic gas price by 20% as of January 1, 2004, he said.
Ryazanov also said that Gazprom would invest $3 billion in developing its pipeline network over the next few years.
The contractors to build the new pipelines will be chosen by tender, he said. He did not elaborate. Prime-Tass
Source URL: http://www.russiajournal.com/news/cnewswire.shtml?nw=39253
It should also be noted that Gazprom is 38% owned by the Russian government.
I didn't know that they were 38% state-owned, so they are indeed subsidized. I am not feeling ambitious enough right now to try to see if the domestic dumping continued after the beginning of the year.
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