Russia seeks monopoly price caps to trim inflation

ChrisD(RJ) chrisd at russiajournal.com
Fri Jun 14 03:13:49 PDT 2002


Pms wrote:

What kind of growth in wages is Russia experiencing? Also what's the deal on the new tax on oil? Read about it in financial press. Mentioned in passing almost. Also saw articles commenting on the end of export fees on metals. Are these significant things over there? And while I got you Chris, has anyone expressed opinion that Putin is helping keep US economy afloat with Russian oil?? I was a bit taken aback by the PPI today and partly because it seems that with the dollar weaker oil would be more expensive. Or something like that.

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Real wages in 1999 where about 50% the pre-crisis level. Now, they are about 70-80% of that level. Note that these are OFFICIAL figures. In reality, incomes are usually quite a bit higher than they are officially reported. Part of this increase is not actually an increase; it is that previous underreported "shadow" incomes are becoming legalized. Tax evasion is massive in Russia. The same goes for GDP growth -- a significant amount of the increase is businesses beginning to report their actual production levels and incomes, not actual GDP growth (though that is there too).

There's of course also a big regional difference. I don't think things have changed very much in the Far East or in Siberia, except in the big natural resource extraction and processing towns like those around Norilsk Nickel's enterprises, which have high living standards.

I don't know anything about the oil tax, but it doesn't surprise me. Russia's state budget is almost entirely based on sales of oil, gas and other raw materials. Gazprom alone makes contributes something like 20% of the state budget. I take it the tax was a reduction, not an increase?

Reducing the export fees was a big deal. Export tariffs for raw materials in Russia are huge. Considering that it is much more expensive to drill for oil in permafrost-covered Siberia than in the deserts of the middle east or, in teh case of steel, the fact that you have to pay for transport costs over mind-bogglingly-huge Russia, which does not possess good transport infrastructure, lots of Russian goods have been priced out of the market.

Putin couldn't try to help the US economy afloat if he wanted to. Almost all oil production in Russia is done by private companies; the government can't order them to increase or reduce production like Saudi Arabia can, though of course it can pressure them. The CEOs (read: oligarchs) who run Yukos and LUKoil determine that, not the government. They are trying to pump up production to increase profits and replace Saudi Arabia as the world oil leader.

Hope that's hopeful.

Chris Doss The Russia Journal



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