In 2000, the international oil demand is projected to grow by a. 16% ( in 1999 the respective increment made up 1.2%), in 2001- by 2.5%. Given that in 1999 the world demand for oil grew by a. 0.9 mln. barrel a day, in 2000 it would grow up to 1.2 mln. barrel/day, and in 2001- 1.9 mln. barrel/day. Like in 1999, 2000 would show the excess of the oil demand over the offer which would entail a further fall in its commercial reserves. During the whole 2000 the OECD countries would find their oil reserves being significantly lower the average level of 1990-97.
According to the basic variant of the last ( April 2000) forecast of the US Energy Department, in 2000 the world price for oil, which is equal to the average price for oil imported by the US should make up USD 24.97%. The peak value would be reached in the 1st Quarter with the consequent sliding to USD 23.5. In 2001, the international oil prices would continue their steady albeit rather slow fall: by the end of 2001 the price would reach USD 21/barrel.
The projections provide for rather a broad range of probable deviations from the basic variant under the impact of certain factors. Thus, the further rise in oil output by the OPEC countries may lead to the fall in international oil prices- to a. USD 20/barrel. One may envisage, however, that should that happen, the OPEC countries would undertake measures on restricting the oil output, to support the prices at a higher level. Thus, according to Mr. Ali Rodriges’s statement of 11 April, should the price for the Arabian oil be under USD 22/barrel over 20 days, the OPEC countries would cut their present level of oil output by 0.5 mln. barrel/day.
Considering possible deviations from the basic scenario, according to the US Energy Department, by late- 2000, the international oil prices would be within the range USD 20 27/barrel, which would be substantially higher than between 1998 through 1999. That allows assumption regarding the maintenance of rather a stable financial situation of both the Russian oil companies and the national economy as a whole, since the revenues generated from the export of energy resources are the main factor of formation the state budget revenue, maintenance of Rb.’s foreign exchange, and paying off the country’s foreign debt.
Concepts of the Russia's agrarian policy: two approaches
It's generally known that a concept of the Russia's social and economic development till 2010 is being elaborated in the country. A component part of it currently being worked out is a section devoted to the agrifood sector development. On the 4th of April a concept of the RF Ministry of Agriculture and Food was discussed in the Centre for Strategic Studies (Moscow). This concept will surely be further perfected but its priorities can already be distinguished.
From our point of view, the Ministry's concept differs radically from anything that has ever been proposed by this agency. First of all, the accent has been shifted from institutional transformations - land reform, farm restructuring, privatization, etc. - to the regulation of agrifood markets. The fact is acknowledged that nowadays the state cannot rely entirely on administrative support of agricultural producers but has to use certain levers to shape markets. All kinds of markets are subject to such efforts including markets of agrifood products, inputs, stocks, land. The concept is based on regulation of these markets which is absolutely new as compared to a traditional approach to the national agrarian policy.
It should be noted that institutional transformations are not ignored by the concept. Fortunately, it doesn't revise the basic principles of reform - the country won't survive one more overturn in the agrarian sector. It's supposed to complete transformations in agriculture in the framework of established paradigm. Moreover, gradual development of land market is envisaged.
The second novelty of the concept is the discontinued comparison of current sector indicators with the 1990 level. Traditionally agrarian lobbyists relate production, productivity, profitability and prices with those of 1990 and demand the promptest restoration of the agrifood sector's former positions. The shortcoming of such an approach is its Utopism. We wrote not once that neither production volumes nor price parity in the agrifood sector can be restored at the 1990 level due to the dramatic change of externalities. In particular, the domestic consumer demand for food notably dropped while export opportunities for basic products didn't expand. It means that the pre-reform production volumes are simply unattainable. The hopes to restore the 1990 price parity, when purchase prices were voluntarily raised 1.5-2 fold, are also illusive. Only in 1994 Russia approached the world ratio between prices for agricultural products and inputs and today any change of the price parity will be artificial and fraught with inevitable re-opening of price scissors.
One of the central elements of the Ministry's concept is the involvement of producer associations into the regulation mechanism. The process of forming trade and producer associations in the Russian agrifood sector is currently rather active. Some of them created quite skilled lobbyist institutions that are efficient enough in defending their interests when the state policy is being shaped. They form analytical divisions, finance some activities that are of crucial importance to them but not affordable to the state (e.g. Milk association pays for the development of relevant standards). As state budget becomes tighter, the concept proposes to involve such associations in regulating the sector. This idea is productive in many respects. First, it allows the state to explicitly control the balance between different groups of interests. Today the struggle between them is latent and thus not always efficient. Second, the financial potential of associations can be engaged for fulfilling many state functions such as the mentioned above elaboration of standards, sample contracts, trade rules or product quality control, antitrust regulation, market information dissemination, carrying out or financing of applied research, etc. Third, the activization of such associations definitely strengthens the positions of civil society in the country since it's one of the forms of society members' self-organization.
Finally, the concept attempts to specify the tasks fulfilled by federal and regional authorities. The federal government is to be responsible for: the maintenance of common market space and food security of the country; carrying out of structural and foreign trade policy; unification of land, credit, discount and technological policies; information support of agrifood sector; general state control functions in the sector, e.g. the control over observation of pertaining federal legislation. All the rest remains under the jurisdiction of regional authorities. Given that, the concept strives to define only the federal government's functions and doesn't examine all the agrifood issues which was usually the case in such documents.
Although the document is rather progressive, one can distinguish there a somewhat frightening desire to expand the practice of granting various licenses, allowances, quotas, etc. The recent years' experience demonstrates that such a "regulation" doesn't solve the sector's problems but rather aggravates them multiplying corruption in the society.
Proposals to form the state agricultural bank also raise objections (see February IET survey). The proposal to escalate import protectionism in line with growing value added also roams from one document to another. This proposal has been clearly lobbied by processors to the detriment of domestic agriculture. What does this escalation mean Only that the customs barrier for imported sausage will be high while that for meat - low. Processors naturally strive to retain raw import supplies since their domestic production is accompanied with large transactions costs due to poor infrastructure, inadequate development of domestic raw commodities sector, agricultural producers' opportunism, etc. Currently the domestic agrarian sector can only hope that Russian food manufacturers will re-orient to it and begin civilized activity in this field including investments, technologies, stimulating price policies, culture of contract transactions... The recent years' experience of imposing sugar tariffs has already demonstrated that the escalation of import duties in line with products' deeper processing leads to the degradation of domestic agricultural production. Thus, it's sad that such an approach is reflected in the new concept of the Ministry of Agriculture and Food.
On the whole in this concept one can see a compromise inevitable for a document worked out by the Ministry: it needs to take into account positions of many groups and consequently contains quite a number of contradictory statements.
Two weeks after the discussion in the Centre for Strategic Studies, the Committee of State Duma on Agrarian Issues convened its own large meeting to which it invited representatives of many regions, interested ministries and agencies. The purpose of the meeting was to discuss the Committee's concept of agrarian policy till 2010. The head of Agrarian faction N.Kharitonov didn't conceal an apparent opposition of own concept to the Ministry of Agriculture and Food document. Even irrespective of the second concept's essence, the adoption of two concepts is itself an unpleasant collision for the future Cabinet and the minister of agriculture in particular.
What are the essentials of the concept presented by the Agrarian Committee Unfortunately, this is a rather traditional for Duma agrarian document with a standard set of demands for price parity, state market interventions, multisectoral economy, etc. The document is flagrantly economically illiterate and thus its serious discussion is not rational. It's worth to cite several fragments from the text in order to justify this judgement. "Measures should be taken <...> to stimulate the export of agricultural and food products <...> with the means of <...> export duty <...>"; "It's important to observe the principles of parity of incomes of rural and urban population on the basis of <...> the system of depreciation deductions <...>"; "Price ratios should form on market conditions and be implemented on priority impact of supply and demand"; "Among these measures can be purchase interventions of products with further market interventions, the setting of guaranteed purchase prices corresponding to the world level <...>".
The feebleness of Agrarian Committee's concept is also reflected in the absolute lack of any positive action program. Standard measures of state regulation of the agrifood sector are being enumerated without any system and with an apparent misunderstanding of their essence: purchase interventions (although they cannot be carried out in the transitional economic conditions), mortgage transactions (although they are an analogue of purchase interventions), soft and interest-free credits (without any terms or possible sources of such credits), tariff and non-tariff restrictions of import. It's even proposed to free agriculture from profits tax as if it pays it.
As to the institutional transformations, deputies support the idea of consolidating property in the hands of efficient owners provided that it "should not deprive peasants of their land", although there is a clear contradiction between these two demands. The Duma's concept doesn't foresee the introduction of land turnover in the nearest 10 years.
The whole document elaborated by the country's legislative body demonstrates an absolute lack of understanding of the sector's problems by the people's elected representatives and at the same time their a priori rejection of the government proposals.
The situation is even more paradoxical since the RF Ministry of Agriculture and Food works out its concept before the appointment of agricultural minister and deputy premier. Such an approach is fraught with collision when an adopted concept will have to be executed by senior officials other than the ones that elaborated it. And this will pre-determine its failure. So, whatever concept is adopted today, reliable conclusions about the Russia's future policy in agrifood sector can be done only after the appointment of senior officials and their first decisions.
Between January to February, Russia’s foreign trade turnover made up USD 20.1 bln., or at 30.4% more than its respective index of 1999. During the period in question Russia raised its exports by 47.1%, up to USD 14.1 bln., and imports- by 2.9% ( up to USD 6 bln.). Thus for the two months the foreign trade balance became positive and made up USD 8.1 bln., contrast to a USD 3.7 bln. reported for the respective period of 1999.
During the period between January to February the dynamics of export was determined by an extremely favorable situation in the world markets for commodities that constitute the basis of the Russian export. Considering the price level of February 1999, in 2000 oil prices grew 2.5 times, prices for petroleum derivatives doubled, prices for natural gas in the European region grew 1.4 times, prices for non- ferrous metals grew by 45% on average.
In March 2000, the OPEC countries decided to increase the volume of oil output and sales by 1.7 mln. barrel/day: thus they have alleviated slightly the restrictions introduced in March 1999 to stabilize prices for oil and petroleum derivatives. In the meantime the average price for barrel of Brent is USD 23, while in February, prior to the softening of the restrictions it was over $30.
The President of OPEC argues that the current prices are at a maximally favorable level for the development of the world economy, that is why the OPEC countries do not face a problem of revising the current quotas for the output and sales of oil and petroleum derivatives in the world markets.
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