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Russia joined the International Food Code (adopted by the UN Food and Agricultural Organization and the World Health Organization) but as yet has no national Food Code of its own. The Law urges the Government to work out and to adopt such a Code as a complex of national technical norms in the agrifood sector in compliance with the law on technical regulation.

9. State regulation of agrifood market in case of emergency.

The Law establishes the pattern for RF Governments actions in case of emergency caused by natural calamities (liquidation of damage done by them), economic situation (compensation of agricultures losses in case of extreme worsening of price parity) or in case of threat to the populations food security.

10. Sustainable development of rural areas.

Measures supporting sustainable development of rural areas are an integral part of agrifood policies. They should be targeted at the diversification of rural economy, expansion of employment opportunities and growth of rural residents incomes, development of social and engineer infrastructure, safeguarding of rural landscapes and natural environment.

These measures should be financed not only from funds of federal and regional budgets allocated to agriculture but also from budget funds allocated to development of other branches of economy (education, health care, culture, transport, etc.).

The second part of the Law consists of 15 programs divided in three groups. The first group contains programs rendering general support to agricultural producers. Some of the currently effective programs that proved to be successful were retained therein, e.g. the subsidizing of interest on short- and medium-term credits, subsidies to pedigree stock breeders and elite seed growers, subsidies for melioration works and planting of perennial plantations.

The mechanism of supporting technical re-equipment of agriculture was notably changed. Instead of the state leasing program effective since 1994, a new mechanism is proposed that is free from the basic drawbacks of the previous one. For instance, agricultural producers are supposed to get subsidies equaling 70% of their initial installment under the leasing agreement irrespective of who is the lessor. The state will no longer set the list of eligible purchased machinery. The Law also provides for higher subsidies in case of purchasing new machinery.

Programs for supporting rural credit cooperation and newly formed family farms are envisaged as well.

Two new programs the one for subsidizing purchase of fuels and oils and the other for supporting credits to agricultural producers with low financial stability raise serious doubts. The first program is fraught with outflow of subsidized fuels and oils from agriculture to other markets and low efficiency for primary agricultural production. The second program attempts to solve the problem of credit availability for loss-making farms that seems to be a wrong idea.

The second group of programs is targeted at the regulation of agrifood markets. Three major markets are selected those of grain, meat and sugar. Two basic mechanisms are proposed for regulating grain market aimed to mitigate seasonal price fluctuations. First of all, this is the establishing of price corridor (the upper and the lower guaranteed prices). In case the actual grain prices fall below the minimal level, the state undertakes to buy grain until price for it rises to the guaranteed level. In case prices exceed the upper limit market interventions will be carried out. The above operations are proposed for wheat #3 and #4, feed barley and rye.

Besides, the mechanism is worked out for compensating to agricultural producers a part of expenditures on seasonal storage of grain. Producers can use this grain as a security for subsidized (on common terms) credit. Banks that issued credits under such a security are guaranteed the purchase of this grain at minimal price.

The experience of some Central and East European countries demonstrated that this mechanism will most likely lead to the spread of warehouse receipts on the grain market but wont require real interventions.

For regulating meat market it was proposed to preserve quantitative quotas for import of poultry meat but to abandon them for import of beef and pork (these two food items will be subject to combined import tariffs).

On the market of sugar the currently effective regulating mechanism (introduced in December 2003) is preserved.

Besides, the government promises not to constrain export of agrifood products (except cases when grain market interventions are carried out) and to apply quantitative limits on import of regulated products from the CIS countries until their trade regimes are harmonized.

The tools for fostering rural social development actually pattern the mechanism of currently effective special program of the same name.

The basic virtue of the introduced mechanisms is their direct action excluding the distributive procedure in allotting subsidies that was effective up till now. Actually the Law lifts the subsidizing limit that left a large field for voluntarism and corruption and did not guarantee agricultural producers an access to promised state support. Second, a limit is set on the amount of subsidies granted to one producer ensuring their more socially fair distribution.

Despite some serious (from our point of view) imperfections of the draft Law it still signifies a notable progress in the legislative agricultural policy making in the country.

E. Serova, O. Shick Foreign Trade The favorable business situation on the world markets, Ruble appreciation and increasing effective domestic demand still facilitate the growth in the Russian foreign trade turnover. The key indicators characterizing the development of foreign trade in the 1st quarter of 2004 are at record highs over the last 10 years.

In May, the European Union agreed to the Russias accession to WTO. Russia could defend its relatively low domestic prices of natural gas, which, however, will gradually increase. EU may expect a reduction in import customs duties on motor vehicles and aircraft, as well as access to new insurance and long distance communications services.

In March of 2004, the Russias foreign trade turnover reached US $ 21.1 billion, what is by 20.3 per cent above the figures registered in March of 2003. This March, Russian exports made US $ 13.6 billion (a 16.per cent growth), while imports were registered at US $ 7.6 billion (a 26.7 per cent growth). In March of 2004, the Russias active balance of trade made US $ 7.7 billion, what was at about the level observed in March of 2003 (US $ 7 billion).

In the 1st quarter of 2004, Russian exports made US $ 35.8 billion, what was by 15.2 per cent above the figures registered in the 1st quarter of 2003 (the record high as concerns the first quarters figures registered the period from 1994 till 2004). The highest results were observed not only with respect to fuel and energy, but also other commodity groups. The latter circumstance was related to the growth in export prices (according to the Bank of Russia, the respective index was at 1.079) and the expanding volume of exports (the volume index was registered at 1.071).

The amounts of import of commodities in the 1st quarter of 2004 also grew and made US $ 18.8 billion (a 18.6 per cent growth), what also was above all previously registered volumes of import in the 1st quarters.

The increase in imports was facilitated the Ruble appreciation in real effective terms.

Figure 1.

Main indicators of Russias foreign trade (in US $ bln.).

-1997 1998 1999 2000 2001 2002 2003 Balance Export Import Source: RF Goskomstat, RF CB The high rates of growth in the Russian exports are still to a considerable degree determined by the favorable business situation on the world market.

In the 1st quarter of 2004, the world oil prices were at a high level. After an insignificant decrease in February and March, there was observed a considerable rise in prices. Thus, the quotations of the Light oil prices at the New York exchange made US $ 38 per barrel by the end of the month. The average Urals price made US $ 30.9 per barrel (a 9.4 per cent increase as compared with the figures registered in March of 2003), while the average Brent price was at US $ 33.6 per barrel (a 9 per cent growth). As compared with the figures registered in the 1st quarter of 2003, average monthly oil prices practically did not change.

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The major factors behind the persisting high oil prices were the growing demand for oil in relation to economic growth in the USA and China (in the 1st quarter of this year, the demand for oil in China increased by 18 per cent in comparison with the figures registered in the respective period of the preceding year, while Chinese imports increased by 9 per cent), the threat of terrorist attacks, and the policy of the OPEC aimed at the real reduction in extraction of oil.

The persistence of high oil prices was predetermined by the recent turmoil in Iraq, which prevent a stable increase in extraction of oil and its export from this country. Besides, the global demand for oil in 2004 may increase by 1.7 per cent to 2.2 per cent and make 80.3 to 80.7 million barrels a day. According to the recent forecasts of the International Energy Agency, the average annual oil price (Light) can make US $ 33 per barrel in 2004.

The average Russian oil prices made US $ 30.53 per barrel (US $ 222.88 per metric ton) according to the results of the monitoring conducted in March and April, as compared with US $ 28.32 per barrel registered in January and February. Proceeding from the formula set forth by the law, on June 1 the rates of export duties on oil should make US $ 41.6 per metric ton (currently US $ 35.2 per metric ton). This rate of export duty is the record high in the period from February of 2002, when the export duties pegged to the prices observed on the world markets were first introduced.

In March, the contract prices of Russian natural gas declined by 2.6 per cent in comparison with the figures observed in February of 2004. in the 1st quarter of 2004, the average monthly price of natural gas increased by 10.6 per cent in comparison with the figures observed in the respective period of 2003.

In 2004, the significant growth in demand for ferrous metals in Europe, USA, and a number of Asian countries resulted in a considerable increase of the respective world prices. In March of 2004, the European export prices of major types of merchant rolled shapes and flat rolled products grew by about 18 per cent in comparison with the figures registered in February.

The exceptionally good price situation persists on the market of non-ferrous metals, what may be explained by economic growth observed in Asian countries and USA. In the 1st quarter of 2004, the average monthly nickel, copper, and aluminum prices increased in comparison with the figures observed in the respective period of 2003 1.7 times, 1.6 times, and by 18.2 per cent respectively. The average nickel price in March of 2004 made US $ 13730 per metric ton (a 9.8 per cent decline in comparison with the February figures), the aluminum price made US $ 1660 per metric ton (a 1.4 per cent decline), and copper price made US $ 3018 per metric ton (a 8.5 per cent growth).

Table The average monthly world prices in March of the respective year 1996 1997 1998 1999 2000 2001 2002 2003 Oil (Brent), USD / metric 19,1 19,2 13,0 13,7 26,9 25,5 24,1 29,1 33,ton Natural gas, USD / thous. 1,870 2,170 2,120 2,828 5,200 2,996 5,757 5,c. m.

Gasoline, USD / metric 0,603 0,645 0,467 0,527 0,934 0,890 0,783 1,005 1,ton Copper, USD / metric ton 2584,7 2424,8 1772 1477,1 1779,1 1780,3 1605 1681,6 3018,Aluminum, USD / metric 1600,8 1635,5 1441,3 1251,1 1584,2 1511,2 1403,17 1393,1 1660,ton Nickel, USD / metric ton 7955,7 7929,5 5380 4934,5 10269,6 6140,3 6503,33 8402,4 13730,Source: calculated in accordance to the data presented by London Metal Exchange (UK), International Oil Exchange (London) In the 1st quarter of 2004, the amount of export transactions vis--vis the countries outside CIS made Rub.

31.4 billion, what was by 18.4 per cent above the figures registered in the respective period of the preceding year; in March the amount of exports made US $ 11.24 billion (13.7 per cent). On the whole, imports from these countries demonstrated intensive dynamics in the 1st quarter of 2004 the respective imports made US $ 15.3 billion, what was by 18.6 per cent above the figures registered in the 1st quarter of 2003. this March, the import of goods accounted for US $ 6.0 billion (a 24.4 per cent increase in comparison with the figures observed in March of 2003).

In March, the amount of Russian trade vis--vis CIS member countries made US $ 3.85 billion, the exports and imports grew by 35 per cent in comparison with the figures registered in March of 2003; the amounts of import and export made US $ 2.31 billion and US $ 1.54 billion respectively.

In May of 2004, the government of Belorussia forwarded to the governments of Russia, Ukraine, and Kazakhstan a package of documents, proposing to create a single fuel and energy complex in the framework of the single economic space (SES) and work out a joint perspective fuel and energy balance of four states up to year 2015. Belorussia is not content with the situation, where it has to sign a new agreement with Gazprom each year. The Gazprom management extremely negatively apprised the Belorussian proposal. As a matter of fact, Belorussia categorically refuses to create a joint venture between the Belorussian state gas company Beltransgaz and the Russian Gazprom. The joint venture should manage the Belorussian natural gas transportation system, and Russian natural monopoly hoped to obtain control over its export channel, thus reducing the risks of its European consumers and compensate its losses caused by payment arrears of Belorussia.

As a result, Beltransgaz and Gazprom have not signed contracts for supply of Russian natural gas to Belourssia and transit of Russian natural gas to Europe until the end of 2004 as yet. This situation even made Gazprom to stop the transportation of natural gas via Belorussia in February of this year.

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