RUSSIA MAY AGAIN MONOPOLIZE EXPORTS OF OIL

Rumors that the Russian government is again likely to monopolize oil exports are well founded, the Moscow press reports.

June 7, 1993

2 min read

Rumors that the Russian government is again likely to monopolize oil exports are well founded, the Moscow press reports.

The business weekly Commersant said Ministry of Foreign Economic Relations personnel have endorsed a proposal for the state to take much tighter control of oil exports, now plagued by chaos and corruption, and have submitted their suggestions to Prime Minister Viktor Chernomyrdin for approval. The plan calls for concentrating oil exports in four or five large holding firms modeled on Gazprom, the joint stock company that virtually monopolizes Russia's gas production, transmission and exports.

Commersant declared, "The motives for state monopolization are clear. Oil accounts for 46% of the government budget's foreign exchange revenue.

"Attempts to revive the oil industry with injections of foreign capital have not yielded the expected results. Last year, oil production by joint ventures increased only 6%.

"Currently there are 36 joint ventures specializing in oil production in Russia, but only five have demonstrated satisfactory results. State credits given to the oil industry are spent inefficiently and are devoured by debts the oil firms owe to each other and to suppliers (instead of being used for capital investment)."

Under those conditions, Commersant said, the desire to introduce a government oil export monopoly is understandable.

"Russian firms currently deposit much of their oil export earnings in western banks, depriving the economy of much needed hard currency. Oil production is still failing, and exports have shrunk from last year's levels.

"This means Russia can hope to get only $3 billion in oil export revenue during 1993, whereas in its best years it earned as much as $10 billion. The current figure is too little even to pay for critical imports to keep industries operating, let alone service foreign debts."

Commersant quoted Yevgeny Gurov, a foreign trade specialist in the Komineft (Komi Oil) corporation as saying, "I believe all oil exports should be monopolized because practically everybody is now selling oil.

"All these small businesses that are now buying crude and refined products for resale drive prices down. They know little about sensible pricing policies."