2000 2001 2002 2003 2004 Balance Export Import Source: RF Goskomstat, RF Central Bank Fig 1. Main indices of Russia’s foreign trade (billion USD) In the first quarter of this year, the export of commodities grew, as compared to the same index of 2004, by 41% or up to 52.6 billion USD, i.e., having achieved one more peak among the first quarters of the years 1994-2005. This was the result of a very favorable situation on the international market. In January - March 2005 the Russian exporters’ position on the international commodities markets was much better than in January - March 2004. As estimated by the Bank of Russia, the international prices of the main commodities exported from Russian in January - March 2005 grew by 38%, as compared to January - March 2004.
In March, the price of Urals oil was 47.7 USD per barrel, having increased, as compared to that in February 2005, by 16.8%, the price of Brent – 53.7 USD per barrel (growth by 17%).
The price of Urals in January - March 2005 was 43.1 USD per barrel and by 46% higher than in January - March 2004. The average price of Urals in March – April 2005 was 47.558 USD per barrel.
Thus, according to the accepted formula, the export duty on oil in the RF from 1 June 2005 was set at a new record level of 136.2 USD per ton. It should be remembered that the first record rate of the duty on oil, amounting to 101 USD per ton, was introduced from 1 December 2004. From 1 February 2005, on the basis of oil price monitoring in November - December 2004, the export duty on oil was lowered from 101 to 83 USD/ton. From 1 April 2005 the export duty on oil was raised to 102.6 USD/ton.
The price of natural gas in Europe in March 2005 went up, as compared to March 2004, by 37.3%;
that of diesel fuel - by 54%, of petrol - by 41.2%, of fuel oil - by 27%. On the average, the prices of energy resources increased by 43%, of non-energy commodities – by 20%, including of ferrous metals – by 32%, and of non-ferrous metals - by 13%.
The global economy’s need in copper has continued to grow: in late February the London Exchange registered a record high for the past 16 years (3275 USD per 1 ton of refined copper). However, in mid-March it was surpassed: 3307 USD per 1 ton. The reasons are the growing demand of the processing economies of China, the USA and Japan. It is expected that by this year’s end the copper market will grow by 3 - 4%, and global consumption will reach the level of 17.5 million tons.
The prices of nickel, having gone up during the last two years, are still growing. The average monthly price of the available nickel on the London Metal Exchange (LME) in February was USD per 1 ton, in March – 16190 USD.
Jul Jul Jul Jul Jul Okt Okt Okt Okt Okt Jan Jan Jan Jan Jan Jan Apr Apr Apr Apr Apr Table Average monthly international prices in March of each year 1996 1997 1998 1999 2000 2001 2002 2003 2004 Oil (Brent), USD/ton 19.1 19.2 13.0 13.7 26.9 25.5 24.1 29.1 33.6 53.Natural gas, USD/thous. m3 1.870 2.170 2.120 2.828 5.200 2.996 5.757 5.267 7.Petrol, USD/ton 0.603 0.645 0.467 0.527 0.934 0.890 0.783 1.005 1.12 1.Copper, USD/ton 2584.7 2424.8 1772 1477.1 1779.1 1780.3 1605 1681.6 3018.0 3254.Aluminum, USD/ton 1600.8 1635.5 1441.3 1251.1 1584.2 1511.2 1403.2 1393.1 1660.0 1988.Nickel, USD/ton 7955.7 7929.5 5380 4934.5 10269.6 6140.3 6503.3 8402.4 13730 Source: based on the data of the London Metal Exchange (London, UK) and the International Oil Exchange (London) The value of commodities import in the first quarter of 2005 was 24.5 billion USD (growth by 24,8%), which is also higher than all the import volume indices recorded earlier in a similar period.
The growth in commodities import in early 2005 was due primarily to its growing physical volume accompanied by a more modest growth in prices. Thus, the physical volume index in this year’s first quarter was 119.7%, the index of prices – 106%.
The increased supplies from abroad were stimulated, in particular, by the rouble’s strengthening in real effective terms. On the domestic market, in nominal terms, in March 2005 the rouble’s exchange rate in respect to the USD became higher by 1.3% than in the previous month, and in respect to the euro – lower by 0.3%. As compared to December 2004, the rouble’s exchange rate grew in nominal terms by 1.1%, in respect to the USD, in respect to the euro – decreased by 2.3%.
In real terms, in March 2005, as compared to February 2005, the rouble’s exchange rate became higher in respect to the USD by 1.8%, in respect to the euro – by 0,5%. As compared to December 2004, in March 2005, the real rouble strengthening in respect to the USD was by 4,7%, to the euro – by 6.8%. The rouble’s real effective exchange rates in respect to the currencies of the countries – the RF’s major partners in trade – in March 2005 became by 1.2% higher than in the previous month, and by 5.1% than in December 2004.
In import’s commodities structure, in the first quarter of 2005 ã. (according to the customs statistics) the share of machinery and equipment went up to 40.7%. These import items, in terms of value, grew, as compared to the first quarter of 2004, by 1.3 times. The import of passenger cars grew in value by 1.6 times, in physical terms – by 1.7 times.
The import of foodstuffs and agricultural raw materials (excepting textiles) went up by 21.1%, their share in import’s total volume became 18.3% (having decreased, as compared to the first quarter of 2004, by 0.9 percent points).
The import of chemical products increased by 32.4%, while their share rose to 17.3% (growth by 0,7 percent points). The value volume of the import of pharmaceuticals grew by 1.6 times, both in prices – by 35.3% and in physical volume – by 16.9%.
In Russia’s foreign trade’s geographical structure a special place is, as before, occupied by the European Union, her major economic partner. Its share in the Russian commodities turnover in January - March 2005 amounted to 53.5% (in January - March 2004, before the Union expanded to embrace 25 countries, its share had been 36.5%). The share of the Asia-Pacific Economic Cooperation in Russia’s commodities turnover January - March 2005 was 15.3% (in January - March 2004 – 16,7%).
The CIS’s share in the RF’s foreign trade turnover went down from 17.9% to 15.3%, largely due to a decline in the bilateral trade with Belarus. While a year ago that country’s share in the Russian foreign trade was 6.6% (3.41 billion USD), now it amounts to 4.6% (3.12 billion USD). The decline involved both the export of Russian commodities (1.88 billion USD against 2.07 billion USD one year earlier) and the import of Belarusian commodities (1.23 billion USD against 1,34 billion USD). In physical terms, the foreign trade turnover between the two countries went down by 9.3%, whereas even after the 1998 default it had decreased by only 7.7%.
This is associated primarily with the introduction, from 1 January 2005, of a new procedure for the payment of the VAT. Previously, the sale of commodities to Belarus had been treated in the same way as sales in Russia. Companies used to pay the VAT as usual – at the rate of 18%. However, beginning with this year, the commodities exported to Belarus are to be taxed by the VAT at zero rate. And when Belarusian commodities are imported to Russia, Russian companies, on the contrary, must now pay the VAT just as they play it on any other commodities imported from any other foreign country. Previously, they did not pay any tax on commodities imported from Belarus. They could carry forward the VAT that had been paid on the commodities being supplied from Belarus. From 2005, the “country of destination” principle was adopted. It seems that the rules introduced symmetrically in the two countries could not have produced any influence on these countries’ mutual trade.
The agreement between Belarus and Russia concerning a switchover to a new procedure for the payment of the VAR was signed in September 2004, to come into force from 1 January 2005. There was enough time for developing the necessary legislative acts and other documents, as well as to distribute the information among economic subjects. However, the corresponding decree of the Belarusian government was adopted only on 31 December, and the President’s Edict “On some issues of calculating and paying the VAT” appeared only on 13 January 2005. In mid-January, the Belarusian government made the decision that the VAT was to be imposed also on individual entrepreneurs. This came as a blow to Belarusian small businesses: previously, they had been paying, under a simplified scheme, only a single tax at a fixed rate ($ 150) and the single social tax, whereas from 1 January they had to withdraw 18% of their turnover as the VAT.
The situation was further aggravated by the absence of a customs border between Russia and Belarus. Under such conditions, the customs’ functions were assumed by the tax authorities, which required the development of a fundamentally new mechanism for recording commodities flows. Now Russian exporters supply a certain commodity into Belarus, their contractors pay the VAT at the tax inspectorate, and then submit to those exporters a payment statement, after which the tax is deducted.
All this can be very time-consuming. As a result of the appearance of a more complicated procedure for substantiating the VAT’ zero rate and the growth in export prices, the competitive capacity of the commodities of both Russian and Belarusian producers became lower.
In January – February some Belarusian enterprises discontinued their supplies to Russia. The Belarusian entrepreneurs staged in February several large-scale demonstrations, and on 1 March declared a “tax strike”, putting forth the demand that the old regime for the VAT payment be restored..
The Russian entrepreneurs were influenced very little by those changes, if at all. When the Belarusian business and officials get adapted to the new regime, the trade volumes will, most probably, go up to the same level as before.
In the first quarter of 2005, the issues of adjusting some import and export customs duties on a number of commodities were discussed. Thus, in particular, were reduced the import duties on spare parts and additional appliances to scales, spare parts for washing machines, and motor car components being imported for industrial assembling. In order to protect Russian manufacturers, in January - March 2005 some investigations were undertaken, resulting from which the following measures were introduced:
- special protective measures for the import of poultry meat and ball bearings into the Russian Federation;
- a compensatory measure for the subsidized import, into the Russian Federation from Ukraine, of filling rods for reinforcing ferroconcrete constructions;
- an antidumping measure for the import of galvanized rolled stock from Ukraine.
In May 2005, the Rosselmash imposed a ban on the import into the Russian territory of all crop products, including vegetables and fruits from Moldova. This resulted from the fact that the Moldavian plant protection service was not complying with the Russian and international requirements to the supply of plants, thus making it possible for the entry of dangerous diseases and pests into this country.
Beside the ban against Moldova, similar measures were imposed against Belgium, Estonia and Denmark because of the discovery in their supplies of dangerous pests, and in particular thrips. Until the end of this summer, neither France will import any flowers to Russia. Until 15 February, a similar ban had been effective against the supplies from the Netherlands, and until 1 May – against those from Germany.
In respect to the Russian commodities, as of 1 April 2005, 103 measures were imposed, including the following: 49 antidumping duties, 3 protective duties, 13 quotas, 4 pricing restrictions, 11 adminis trative measures, 1 nomenclature restriction, 1 ban on import, 1 additional tax, 2 tariff quotas, 13 technical barriers, 1 phytosanitary measure, 1 excise, as well as three measures upsetting the normal competition conditions. Also, presently 9 antidumping and 8 special protection investigations are under way.
N.Volovik Positive Changes in Economic Provision of Reorganization of the Russian Military Institution on the Basis of a New Recruitment System This paper provides analysis of changes in the military and economic policy that took place early in this year and their effect on the reform of the existing recruitment system of the military institution of Russia. A collection of numerous facts has led us to a conclusion of a positive social impact of the changes and opportunity of oncoming transition of the RF Military Institution’s regular forces to a voluntary or contract-based recruitment system.
At present, given a successful execution of the national budget 2005 and new favorable economic outlooks over the period to 2008, it should seem to be no reasons for concern about implementation of the socially relevant decisions that were adopted in previous periods, RF Government Resolution No.
523 of 25 August 2003 in particular. This resolution approved a Federal Target Program ( FTP ), “Transition to a Contract-Based Recruitment System of Military Personnel at Certain Military Forces and Units for the Period of 2004 to 2007”.
There is a growing number of military forces and almost entire units that are staffed with personnel recruited on a voluntary or contract basis for the first time in the history of Military Institution of Russia. This is related mostly to the military forces located in Chechnia. Not long ago, however, some senior military officials of the RF Ministry of Defense stated that this move is unreasonable, and each military unit should include at least a logistics platoon staffed on a draft basis. It took them long to fight for designing a new military recruitment system “on a principally contract basis” rather than “on an exclusively contract basis”. At present, the situation has changed for the better.