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Excerpts from the JRL E-Mail Community :: Founded and Edited by David Johnson

#15 - JRL 7260
No 28
July, 2003

Author: Yevgeny Dmitriyev
[from WPS Monitoring Agency, www.wps.ru/e_index.html]


Question: Herman Oskarovich, what do you think of the situation with YUKOS? Will it deteriorate the image of the country in the eyes of Western investors? Will it eventually harm Russian economy in general?

Herman Gref: As I see it, what domestic investors think about all of that is much more important. After all, all of them have the question whether it is the prosecutor's office interested in one particular company or if the outcome of privatization in general is questioned. The eventual harm and damage will depend on the answer to the question. If the investors, foreign and domestic alike, decide that the matter concerns a revision of the outcome of privatization, damage will be colossal.

I can therefore say categorically that there will be no revision of the outcome of privatization. Neither the president nor the government will permit a campaign like that. The individuals and companies that participated in privatization honestly, with respect to the law, do not have anything to fear.

Question: On July 16, your Ministry of Economic Development officially upped the GDP growth prognosis for 2003 from 4.6% to 5.9%. Is it one of the steps towards the demanded doubling of the GDP?

Herman Gref: A lot of our ideas and innovations work for the task...

It is of paramount importance to adopt two packages of draft laws in the course of the autumn parliamentary session - on insurance of bank accounts and hard currency regulation and on Russia's future membership in the World Trade Organization.

Question: At a meeting with representatives of the European Union not so long ago, you discussed the evening of domestic and foreign prices for fuels...

Herman Gref: We intend to prepare certain proposals for the Russia - European Union summit scheduled for September. I hope that they will offer a solution to the problem, both technical and political.

Question: When the matter concerns draft laws pertaining taxation and hard currency, how do you manage to find a compromise with the Finance Ministry?

Herman Gref: There is certain discord and there will be some of course, but it is all right.

Our debates with the Finance Ministry are quite productive. After all, Alexei Kudrin's ministry and us have been successful in agreeing on some serious tax-reduction steps.

Question: There are, however, instances when you fail to find a compromise. The matter concerns the raft law "On special economic Zones".

Herman Gref: Yes, you are unfortunately correct. I hope, however, that we will find a solution sooner or later.

Question: Do you think you will manage to make an agreement with the Duma this year, the year of election? Say, on the subject of the federal budget?

Herman Gref: We ran an experiment with a zero reading of the budget last year. It was effective. It is going to be much more difficult this year. The election is coming up, and deputies will have a lot of "special" requests - by that I mean requests from factions, parties, and individual lawmakers. We do not have the money to meet all the requests.

Moreover, adoption of the budget is going to be difficult now because we are forced to restrict the expenses (among other things, because of the lower taxes). First and foremost, the reduction will affect lawmakers' pet spheres - investments, agriculture, and arms spending. These three articles have already been cut into in the work on the 2004 budget.

Question: The July 24 meeting of the Cabinet is scheduled to discuss the export support program. How much money will the program get?

Herman Gref: We have agreed with the Finance Ministry already that about $500 million will be specified by the 2004 budget for the purpose. I do not see any serious objections to the sum from the Cabinet. First and foremost, the matter concerns contracts for hi-tech equipment. This is one of the steps aimed at diversification of economy...

All the same, we expect some debates yet.

Question: What are the plans for support of the administrative reforms? So far, the Ministry of Economic Development has been stripped of some functions only. Do you hope for some progress?

Herman Gref: I hope that the process will take two phases. The Cabinet has already made the decision on phase one - reduction of surplus functions of ministries. We have begun with us indeed, so as to do away with the assumption that this is a campaign against somebody specific. The Ministry of Economic Development analyzed the scope of the functions it performed and suggested abolition of some of them. The same awaits other ministries and departments.

As a matter of fact, these are but preparations. The work will begin with appearance of the governmental resolution or presidential decree on establishment of the commission for the administrative reforms.

Question: Is it the Ministry of Economic Development that will analyze the proposals?

Herman Gref: Yes, for the time being. Afterwards, a special commission will do it. It is after that only that we will suggest a new arrangement of state regulation of national economy. We will suggest abolition of certain functions and their transfer to appropriate bodies.

Question: The Russian-American energy summit is scheduled to take place in St. Petersburg this September. Will increase of Russian oil export to the United States be considered there?

Herman Gref: Sure. In direct connection with construction of the northern deep-sea terminal. If we build a terminal and pipeline in Murmansk, oil deliveries to the United States will become undoubtedly profitable. Washington has already indicated its intention to buy Russian oil to build up the American reserves.

Question: What do you think of the process of reorganization of the natural monopolies? What is happening to the gas market reforms?

Herman Gref: Reorganization of the Ministry of Railroads and Russian Joint Energy Systems is on schedule.

As for the gas market, we have not yet reached the final agreement with Gazprom. For example, it believes that the tariffs will double or triple after the planned restructurization and hit independent producers and domestic users.

Gazprom does not want to part with its monopoly ion the domestic market. It fears a crash of prices and serious consequences on the national scale. We understand all of that...

Unfortunately, Gazprom-related problems are all too frequently presented as a banal confrontation. Nothing could be further from the truth. Alexei Miller and me meet regularly.

(Translated by A. Ignatkin)

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