#29 - JRL 2007-19 - JRL Home
Subject: RE: 2007-#18-Johnson's Russia List/ Straus
Date: Thu, 25 Jan 2007
From: "Andrei Liakhov" <andrei.liakhov@nortonrose.com>

Reply to Ira Strauss - Last, but not Least

1. I must apologise for having been misleading as was pressed for time - WTO required not only Russian domestic but also Russian export gas prices to be put in line with the world market prices.

2. Russia was given 3 years to level export prices which are now calculated on the basis of one formula for all GP customers.

3. Russia's domestic gas prices will remain subsidised (with subsidies being gradually phased out) until 2014 (if my memory serves me right - I do NOT have the relevant documents in front of me).

4. Russia announced its intentions to raise gas prices for every customer in early spring 2004, however CIS customers chose to ignore this warning.

5. Gas price is tied into and is being driven by the price of crude oil (BOE to be exact) and normally follows ups and downs of the oil price - I would invite Ira to list at least 1 (ONE) abrupt gas price hike pre-2003 in the CIS. Mass media reports and political hysterics aside before 2003 CIS customers were paying c.70% of the price charged to the EU at the same time running huge payment arrears. When (thanks to Bush Iraqi adventure) oil price went from $30/$35 to $70 gas prices followed everywhere, but in the CIS. This created a huge unfair competitive advantage for, e.g. Ukrainian and Russian steel exports to the US which WTO negotiators sought to abolish. Russia obliged.

6. As media reporting of this demonstrates, discussion of complicated economic and legal matters should be left to experts who know all the facts and are capable to give the full picture, rather than spin of half truths for the narrow interests of various lobbying groups or idle musings of people "who have heard the bell but do not know from which direction" (a loose translation of an old Russian proverb).