Prices for oil at the world market continued to decrease as a result of November 2008. The price of oil grade Light Sweet as a result of the bids at NYMEX on November, 28 made USD 54.43 per barrel, which is by USD 13.07 per barrel below the figures of the beginning of the month. The price of oil grade Brent as a result of the bidding at the London Intercontinental Exchange on the same day made USD 53.49 per barrel (- USD 11.98 per barrel as compared with the beginning of the month). Price for oil grade Urals was equal to USD 51.1 per barrel in November, which is 43.3% below the figure of November 2007 and by 27.5% below the figure of the previous month. On average as a result of November prices for oil have reduced by more than 25%.
Prices for nickel according to cash deals at London Metal Exchange lowered by 14.9% in November and made USD 9.7 thousand per ton by the end of the month. On average over November the price for nickel made USD 10.7 thousand per ton, which is below the figure of October – USD 12.1 thousand per ton. In November increase in nickel stocks at London Metal Exchange went on. As a result by the end of the month stocks of metal at the exchange increased up to 63.5 thousand tons as compared with 57.9 thousand tons at the beginning of the month.
Prices for copper also reduced in November. The reason for this is the decrease in demand. According to November, 28 the price for copper at London Metal Exchange made USD 3581 per ton, which is significantly below the figures of October (USD 4925 per ton). Stocks of the metal at London metal Exchange have increased up to 291.7 thousand of tons as a result of November as compared with 237.9 thousand of tons at the beginning of the month.
The prices for aluminum reduced down to USD 1.7 thousand per ton in November as compared with USD 2.0 thousand per ton at the beginning of the month. The stocks of aluminum at London Metal Exchange were 1803 thousand of tons on November, 28, which is approximately by 275 thou Ma Ma Ma Ma Ma Ma Ma Ma Ma Jan Jan Jan Jan Jan Jan Jan Jan Jan Sep Sep Sep Sep Sep Sep Sep Sep Sep sand of tons more than at the beginning of the month. The average monthly price of aluminum according to the cash deals at London Metal Exchange made USD 1852 per ton as compared with USD per ton a month ago.
Table Average Monthly World Prices in November of Corresponding Year 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Oil (Brent), USD/barrel 17,8 11,5 24,1 25,6 19,35 24,4 28,6 43,1 55,0 57,68 92,41 57,Natural gas, USD/mln BTU 2,393 2,251 2,558 5,767 2,843 4,11 4,876 6,533 9,403 15,95 8,02 8,Petroleum, USD/gallon 0,5648 0,3739 0,6986 0,7649 0,5454 0,7203 0,845 1,289 1,801 1,52 2,40 1,Copper, USD/ton 1834,7 1601,6 1748,1 1914,4 1481,0 1610,0 2052,0 3123,0 4269,0 7002,0 6961,1 3715,Aluminum, USD/ton 1535,5 1305,0 1470,7 1562,5 1326,6 1373,4 1507,0 1814,0 2051,0 2704,0 2506,9 1851,Nickel, USD/ton 6099,0 4202,0 7984,2 7315,4 5159,7 7316,7 12090 14026 12116 31023 30610 Source: calculated on the basis of London Metal Exchange, International Oil Exchange (London) The volume of import in the Russian Federation made USD 21.7 bln in November 2008, which is by 19.5% below the figure of the previous month and by 3.8% below the figure of November 2007. As compared with November 2007 import from non-CIS countries reduced but insignificantly – by 0.8%, whereas there were goods worth USD 2.2 bln imported from CIS countries, which is by 24.7% below the corresponding figure of the previous year.
The reduction of import from non-CIS countries was observed for all consolidated positions of the goods range. Thus, as compared with October 2008 in November 2008 there was a decrease in purchase of machine-building production by 21.1%, of chemistry production – by 18.9%, of textile goods and footwear – by 32.4%, and of foodstuffs – by 5.8% registered.
Under the influence of faster reduction of export as compared with import the foreign trade balance decreases, it reduced down to USD 8.4 bln in November 2008 against USD 13.5 bln in November 2007.
Due to extremely favorable situation at the world market in the first half of 2008 the main indices of the Russian foreign trade over 11 months of 2008 have demonstrated a considerable growth. Russia’s foreign trade turnover made, according to the data of the Central Bank of the Russian Federation, USD 710.6 bln in January-November 2008 (138.1% on January-November 2007), including export of USD 442.7 bln (140.2%), import of USD 268.0 bln (134.9%) The balance of foreign trade remained positive, being USD 174.7 bln (USD 117.1 bln in January-November 2007).
As compared with the corresponding period of the previous year, in January-November 2008 export of fuel and power commodities continued to grow at the anticipating rates (151.1%), which resulted in the increase of the share of these commodities in the export structure by 5 per cent.
The export of chemistry industry commodities has considerably increased in terms of value (147.8%), and of fertilizers – by 2.5 times due to the prices growth.
Export of foodstuffs and agriculture raw materials has increased in terms of value by 5.3% due to the increase in sausage goods export, canned meat and fish, tobacco, sunflower oil (despite the decrease in physical volumes by 1.7 times). Export of wheat has reduced by 19.4% despite the growth of contract prices.
Export of half-finished iron and alloy-free steel products grew by 1.8 times due to the increase in prices, export of rolled flat iron and alloy-free steel – by 33.8%, export of cast iron – by 1.6 times fully due to the growth of prices. Aluminum export has increased in value by 25.5%, copper export reduced by 31% due to the reduction of the physical volume of supplies by 35.2%, the same as nickel export – by 37.9% due to the decrease in prices by 39.9%.
High import growth rates were mainly accounted for by the increase in machinery, equipment and transport vehicles import (growth of 44.8%). The share of this group of goods in the structure of the Russian import made 52.8% in January-November 2008 as compared with 50.5% in JanuaryNovember 2007.
Despite a considerable growth of value volumes the share of chemistry industry production, metals and goods thereof, foodstuffs and agriculture raw materials, wood and pulp-and-paper goods, textile and sewing goods in the total volume of the Russian export has decreased.
At the beginning of December 2008 the President of the Russian Federation has signed the federal Law “on making amendments to article 3 of the Law of the Russian federation “On customs tariff”, aimed at changing of the procedure for establishing of the export customs duties for crude oil. According to this law, the period of monitoring of oil prices at the international markets of the oil raw materials, which is conducted to establish export duty rates, is envisaged to be reduced from two months to one month, and the same applies to the terms of effect and the dates of introduction of these duties.
The new mechanism will enable a faster reaction both to the changes in the economic situation in the country and to the fluctuations of world prices for oil.
In this connection the period for monitoring of oil prices at the world markets of oil raw materials is established to begin on the 15th of each calendar month and end on the 14th of the next calendar month, starting with October, 15, that is post factum. The period of effect of these export duty rates for crude oil and some categories of commodities produced from oil is also reduced tone month, according to the changes.
It should be remembered that starting with December, 1 2008 duty rate for crude oil export from the Russian Federation was reduced down to USD 192.1 per ton. The duties for light oil products were reduced to USD 141.8 per ton, and for the dark – to US 76.4 per ton. Starting with January, 1 export duty rate for oil made USD 119.1 per ton. The new duty rate is calculated on the basis of the average price of the Russian oil monitoring from November, 15 to December, 14. The price was equal to USD 43.966 per barrel. Export duty rate for light oil products is equal to USD 92.6 per ton, for dark oil products – USD 49.9 per ton.
On December, 29 2008 of the Government of the Russian Federation adopted the decree “On the measures of the government regulation of the goods imported in the customs territory of the Russian Federation from the Ukraine”, according to which the period for sugar requisitioning of the regime of the free trade with the Ukraine is prolonged to January, 1 2013. This means that Ukranian sugar will still be subject to duties when imported in the Russian Federation. The requisitioning of sugar from the regime of the free trade should have been abolished on January, 1 2009, however, in connection with the Ukraine’s accession to the WTO, the effect of duties was decided to be prolonged.
The Ministry for Economic Trade and Economic Development together with the Ministry for industry and Ministry for Agriculture of the Russian Federation were commissioned to conduct the analysis of the situation at the Russian market of sugar and in case of need submit to the Government of the Russian Federation the proposal on the abolishment of the change in the date of tariff requisitioning of white sugar from the free trade with the Ukraine before November, 1 2012. Besides, the Federal Customs Service should each month submit the data on the import of a whole range of goods from the Ukraine to the Russian Federation to the ministries mentioned, and these ministries should in case of need submit the proposals to the Government concerning efficient changes in the existing measures of customs and tariffs regulations of the Ukrainian import. The monitoring will apply not only to sugar, but also to different kinds of meat and meat products, dairy products, butter, sunflower seed oil, sweets, paper, cardboard and packaging made of it, as well as ethanol.
With regard to ethanol from the Ukraine, there is also a requisitioning from the regime of free trade currently in effect, which should be abolished in January 2010.
It should be remembered that currently the duty for white sugar import in the Russian Federation makes USD 340 per ton and is effect from 2004, but according to the agreement on the free trade regime, beet sugar from Belorussia, Moldova, Azerbaijan, Kyrgyzstan, Kazakhstan and Armenia is subject to duty-free import in Russia.
The presence of duty-free raw sugar quota for sugar import, which the Ukraine received after its accession to the WTO would have been enabled this country to use the schemes of import substitution:
export beet sugar of its own production to Russia, substituting it by cheap import sugar in the country.
Meanwhile, the Russian sugar producers have a considerable production potential, and they can satisfy the demand at the internal market. In 2008 the production of beet sugar in Russia made 3.5 million of tons, the total potential of the production capacities being 12 million of tons, taking into account import of raw sugar. At the same time the demand at the internal Russian market is estimated to be million of tons. Non-regulated supplies of the Ukrainian sugar could have damaged the Russian beet sugar complex.
Budgetary and Tax Policy О. Kirillov The federal budget for 2009 is reassessed basing on the new estimates of the Ministry of Economic Development, the most important among which is the price of oil, assessed at USD 41 per barrel and the rate of ruble to the dollar at RUR/USD 35.1. Budgets for 2010-2011 will be planned upon adjustment of 2009 budget. On average, the volume of the RF National Welfare and Reserve funds within the year made 15.57 percent of GDP.
In January of the current year the Federal budget of the Russian Federation for 2009 is reassessed basing on the new estimates, presented by the Ministry of Economic Development, the most important among which is the price of oil at USD 41 per barrel, inflation at 13 per cent and the rate of ruble to the dollar at RUR/USD -35.1.Earlier the budget for 2009 had been estimated basing on oil price at the level of USD 95 per barrel. The reassessment is assigned to the RF Ministry of finance within the shortest term. It should be noted that currently it is impossible to estimate the three-year budget, as the parameters of the budget for 2009 are yet to be assessed, and the budget for this year should serve as the basis for budget planning from 2010 to 2012. It is expected that there will be a deficit in the budgets for 2010-2011.
The Budget Committee meeting should have been held in December last year, but was postponed due to the need to adjust the budget for 2009 in connection with the global financial crisis.
The growth of the Russian economy is expected to be in the current year from zero to 2 per cent, as compared with 6 per cent in 2008. According to Alexei Kudrin, the Minister of Finance, in 2009 the possible growth of the Russian economy is based on the expected growth of demand for the Russian exports in the current situation in global economy. For the purpose of sustaining the economic growth in the country, it is planned to once again to allocate funds to the banking system of Russia. The funds will be primarily provided to public banks, though all other banks can apply for financing as well. The government plans to allocate additional USD 40 billion for the banks’ support, but, according to A.Kudrin, in the nearest future there will be allocated one more tranche of the same amount for the same purpose, if necessary.
From January 1, 2009, an extensive number of new regulations of the Ministry of Finance of Federal Treasury of Russia came into effect, which will undoubtedly have a significant impact on the budget process in the Russian Federation. These regulations are aimed at further improvement of the budget system performance in the Russian Federation. Those regulations include the acts that govern:
• transactions with the funds derived from income-generating activities17;
• procedure of a consolidated register development for the participants of the budget process18;
• completion in the order of operations for the execution of the federal budget in the current fiscal year19;
• the order authorizing payment of monetary liabilities20;
• the budgetary liabilities of budget funds recipients 21;
• the order of budget execution22;
• corporate profit tax accounting and and their distribution among the Russian Federation budgetary subjects23;
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