Source Pravda.Ru

World Bank Attacks EU Because of Russia - 11 March, 2003 - News

In exchange for support of the war against Iraq Russia may be allowed to retain low domestic gas prices
Experts say that refusal of the Russian authorities to equalize external and domestic prices for hydrocarbon stuff is one of the most serious barrier on the way of Russia’s incorporation into the WTO. And it can hardly be said that this is the only discrepancy, but experts say that it is the most serious one. It was quite a surprise for Russia that the World Bank, one of the US’s basic financial instruments on the international scene, criticized position of the European Union concerning the problem. World Bank experts say that it is no use for the European Union to demand that Russia must raise domestic prices for gas up to the level of the gas export prices.

The European Union’s claims in Russia’s address concerning too low domestic prices for gas are of quite a traditional nature. It is an open secret that Europe consumes a lion’s share of gas exported by Russia. Experts even mention some definite “gas dependence” of European countries upon supplies of the Russian “blue fuel”. At the recent negotiations on Russia’s incorporation into WTO concluded in Geneva last week, the Russian delegation managed to lift almost all claims concerning prices for electric energy. Russia’s State Duma passed documents on energy reforms by the moment of another round of negotiations, which in its turn became a decisive factor for lifting of the claims. However, the discrepancies intensified once again when the problem of gas prices was touched upon.

World Bank specialists held their independent investigation of principles of price formation for Russian gas and reached a conclusion that Russia’s state-run gas monopolist Gazprom establishes domestic prices for gas in accordance with the generally accepted world practice. As it turned out, Russia’s domestic price for gas, the same way as everywhere in the world, is approximately adequate to long-term expenses, investments are also taken into consideration at that. Consequently, World Bank experts are sure that “artificially understated” prices and “considerable funding of the industry” in Russia are out of the question. So, it means that the European Union mustn’t insist on liberalization of Russia’s prices for gas, not to mention raising of the prices several times.

According to the Russian mass media, members of the Russian Federation delegation were pleased with the results of the World Bank independent research. It is especially pleasant to know that conclusions reached by the international bankers mainly coincide with the results of an expertise held by Russian specialists and submitted to the WTO for consideration.

A member of the Russian delegation says, results of the research are expected to help the Russian side at the negotiations.

Russia’s Deputy Minister for Economic Development and Trade, Andrey Sharonov emphasizes that “the demands of several WTO members saying that Russian prices for gas must be equalized with the world gas prices are unfair, especially that there is no world gas market in fact.”

Meanwhile, the World Bank that allowed leakage of the information about the researches held by its specialists hasn’t yet published results of the researches officially. Head of the World Bank department in Moscow, Julian Schweitzer said in an interview to The Financial Times: “We haven’t yet worked out distinct opinions on the problem, there are still lots of discussions in the bank in connection with it.” It is informally declared that such a report is a serious attack on one of the Word Bank’s principal shareholder, the European Union.

However, the very fact that results of the research became known right before voting in the UN Security Council on the Iraqi problem means that this position of the World Bank may be part of some political and economic bargaining right before a war in Iraq. It is not in vain that the US Congress once again appeals for the soonest abolishment of the Jackson-Vanik amendment. It is quite clear that nobody can guarantee that the World Bank will further stick to this position officially.

Akhtyam Akhtyrov PRAVDA.Ru

Translated by Maria Gousseva

Read the original in Russian: http://economics.pravda.ru/economics/2003/7/21/64/8176_RussiaWTO.html

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