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Natural gas, bcm



Fossil coal, thou.t



Plant and equipment, mln.USD



Ore and iron ore concentrates,thou.t



Ferrous metals (except for pig iron,ferroalloys and scrap), mln. USD



Synthetic rubber, thou.t



Wood pulp, thou.t



Newsprint paper, thou.t



Data source: the Goskomstat ofRussia.

As for the fuel exports, the natural gassales dropped by 19.1%, the exports of oil products went down by 27.5%,including a 45.4% reduction of the motor petrol supply.

The share of CIS states in the total volumeof fuel exports in quantitative terms had dropped as compared to the previousyear: in 2000 the volume of exported oil products accounted for 6%, as comparedto 3.5% in 2001; the volume of exported natural gas respectively accounted for30% and 27%.

The export of oil, which is Russia's majorfuel resource, built up by 33.9%. During 2001 the share of CIS states in thetotal oil exports grew from 12% to 14%.

Given the world oil market conditions andRussia's commitment to restrict its oil exports, one may expect in 2002 areorientation of Russian oil exports and an upsurge of oil deliveries to theneighboring states, including a large number of barter transactions.

The exports of iron ore, ferrous metals andsynthetic rubber in quantitative terms rose respectively by 22.3%; 9.8%; and20.4%. The upward tendency in the exports of forestry products remainedstable, with an almost 70% increase of wood pulp exports to the adjacentstates.

There is no direct correlation between theaverage actual export prices under contracts with CIS states and the growth ofthe volume of exports to the neighboring regions. For instance, exports to theneighboring states have grown despite the lower export prices as compared tothe similar indices in the trade with Western countries regarding suchcommodities as iron ore (the export price for CIS states was $10.2 per ton,against $13.7 for the third countries) and synthetic rubber (the export pricesfor CIS states and third countries respectively accounted for $752.5 and $923.2per ton). At the same time, the exports of ferroalloys in quantitative termshave grown by 35%, with the export prices for CIS states being $622.9 per tonagainst only $601.4 per ton for non-CIS states.

Imports. Similarly to the foreign trade operations with non-CIS states,imports from the CIS states during the first six months of 2001 were growing ata faster pace. However, the structure of these foreign trade operations wasaffected by the newly introduced procedure for collecting VAT from goodsoriginating from the CIS countries. Already in the second half of the year thegrowth of imports decelerated as compared to the still increasing exports,resulting in the trade surplus, which rose from $0.43 bln. in the first quarterof 2001 to $2.19 bln. at the year-end.

The share of plant and equipment importedfrom the CIS states has grown to 17%. However, food products still rank thehighest on the list of goods imported from the CIS states - they account foralmost 20% of the total imports. The market of food products demonstrated amultiple increase in the volume of purchases.

The growth of deliveries of particular foodproducts from the CIS states exceeded similar indices in the third countries,i.e. the sunflowerseed oil imports rose by 26.5%, against a 9.0% increase ofimports from non-CIS states; the import of chocolate and chocolate productsrose respectively 2.5 times and by 20.9%.

Some commodities imported from the CISstates have fully replaced similar items from non-CIS countries. For instance,as compared to the relevant period in 2000, the import of dried and condensedmilk from the neighboring states grew 10 times, while the import of sameproducts from the third countries dropped 3.2 times.

Over the year, the average contract pricesfor goods purchased from the CIS states have risen by 12%. The prices forsunflowerseed oil and butter imported from the CIS states have topped theprices for the relevant products imported from non-CIS states by 67.9% and 8.3%respectively, but the significant increase in the imports of these goods isindirectly indicative of the growing incomes of the people.

Table 40

The import of specific commodities from theCIS states

January-November 2001

% to January -November 2000

Plant and equipment, mln. USD



Motor cars, items



Cereals, thou.t



Alcoholic and non-alcoholicbeverages, mln. USD



Cotton fabrics, mln. USD



Textile and knitwear, mln.USD



Ferrous metals (except for pig iron,ferroalloys and scrap), mln. USD.



Piping and tubing, thou.t



Fossil coal, mln.t



Sunflowerseed oil, thou.t



Fresh and frozen fish,thou.t



Butter, thou.t



White sugar, thou.t



Data source: the Goskomstat ofRussia

Most serious reductions of imports from theneighboring states have been registered with respect to the followingcommodities: steel pipes and tubes – by 14.8 %; cereals - by 63.8%;and white sugar– by41.8%.

Foreign traderegulation

During the past year significant changeshave emerged in sphere of legal regulation of bilateral and multilateral traderelations of the CIS countries.

At the beginning of April, 2001, submittedfor ratification to the State Duma was the Treaty on the Customs Union andUniform Economic Space, which was signed in February, 1999 by Russia,Byelorussia, Kazakhstan, Kirghizia and Tadjikistan.

The Treaty defined the stage-by-stageprinciple of formation of a uniform economic space. At the first stage, theTreaty proposes to complete the formation of the Customs Union on the basis offree trade principles, the establishment of a uniform procedure for theregulation of the foreign trade activities, the creation of the common customtariff, the simplification and the subsequent cancellation of the customscontrol on internal customs borders.

The Treaty also provides for the transitionof the Customs Union member-states to the collection of indirect taxes basingon "the country of destination" principle instead of the effective "country oforigin" principle within the same framework, which is currently applied to thetrade relations with non-CIS countries. The RF Government is concerned aboutthe new tax-collection procedure as the positive balance in the trade with theCIS and the Customs Union countries largely depends on the export of powerresources.

Therefore, in view of Russia's stand, theTreaty will be ratified after it has been amplified with the exceptionalprovision for Russia about the inapplicability of the "country of destination"principle to the trade in oil, natural gas and gas condensate, and also aboutthe non-use by the contracting parties of the zero indirect tax rate withrespect to the specified fuels. Such agreements have already been signed andratified with Kazakhstan and Kirghizia.

In sphere of free trade, in 2001 onlyArmenia, Kirghizstan and Moldova abided by the commitment on the non-use ofexemptions and have no tariff restrictions. Russia plans to start thecoordination of schedules for the cancellation of exemptions after thecompletion of the intragovernmental procedures aimed to ensure the entry intoforce of the Agreement on the creation of a free trade zone, dating April 15,1994. At present, Russia is applying exemptions to imports from Azerbaijan,Armenia, Georgia, Moldova, Turkmenistan, Uzbekistan, and Ukraine.

Currently Ukraine is not applying tariffexemptions from the free trade arrangement to imports from the CIS states.Byelorussia has not signed bilateral protocols on exemptions with the CISstates and applies exemptions to imports from Azerbaijan, Armenia, Georgia,Moldova, Turkmenistan, Uzbekistan, Ukraine.

Since July 1, Russia's trade relations withthe CIS states have involved the collection of indirect taxes in line with the"country of destination" principle: the indirect taxes, i.e. the VAT and excisetaxes, are paid into the budget of that country, which is the importer andconsumer of the goods.

Russia has long been paying indirect taxesin line with the "the country of destination" principle in its foreign traderelations with non-CIS countries. In its trade with the CIS states, Russia hasbeen collecting VAT on the "country of an origin" basis, i.e. the proceedsremained in the budget of the country where the goods were manufactured. At thesame time, from the beginning of 2001, the bilateral trade relations betweenRussia and, respectively, Kirghizia and Armenia, have involved the collectionof indirect taxes in line with "the country of destination" arrangement. Therelevant agreement with Azerbaijan came into force in April same year. Thetransition of the CIS states to the collection of indirect taxes basing on the"country of destination" principle is progressing rather unevenly. Theoverwhelming majority of the countries have proclaimed de jure the principle of "country ofgoods' destination". In legal terms, only Turkmenistan has retained theprinciple of "the country of goods' origin". However, 7 CIS states, i.e.Azerbaijan, Armenia, Georgia, Kirghizstan, Moldova, Uzbekistan and Ukraine, arede facto implementing the"country of destination" principle. As a result, the symmetric VAT collectionscheme (i.e. according to one or the other principle equally applied by theparties) is used in 60% of the mutual trade operations between the CIScountries under the principle of "the country of destination", and only 10% ofsuch operations follow the principle of "the country of origin". In otherinstances, the asymmetric scheme applies.

Although the changes have not affected thetrade relations between Russia and Byelorussia, the tax collection arrangementcreates certain problems within the framework of the Russian and Byelorussianunion. The Byelorussian authorities claim significant losses due to theapplication of the old taxation scheme. They provide statistics to the effectthat Russia is the major economic and trading partner of Byelorussia,accounting for up to 60% of the total scope of the Byelorussian foreign trade.Nevertheless, Byelorussia maintains its negative trading balance. The Russianauthorities, in turn, assert that the introduction of the new tradingarrangement in Byelorussia contradicts the Treaties on the Creation of theUnion State and on the Uniform Economic Space. During the past year,Byelorussian and Russian experts several times met in Moscow to develop acoordinated position on the issue, which, however, still remains unresolved.The immediate plans include a complete unification of the custom tariffs, taxbenefits, rules and criteria for defining the country of origin and the customsvalue of goods, and new measures aimed at increasing the efficiency of controlover the transit through Byelorussia of foreign-made motor vehicles importedinto Russia.

Due to a lack of legal regulation, Russiaexperiences certain difficulties in its trade relations with the other CIScountries. The reciprocal claims of Russia and Ukraine in sphere of foreigntrade moved in May 2001 from the piping market to the oil market. In the nearfuture Russia is planning to impose prohibitive duties at a rate of 40 % on theimport of Ukrainian pipes, while Ukraine, in turn, is going to launch aninvestigation on the dumping of Russian oil products.

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