RUSSIAN METALS: What are the main benefits of Russia's entry into the WTO? Would it guarantee equal rights for Russia with other players in the world metals market?

SERAFIM AFONIN: The Russian Union of Metal Exporters (RUME) believes WTO membership will help our country acquire international legal protection from the imposition of discriminatory sanctions by other countries.

The number of such sanctions is continually increasing. By labeling Russia a "non-market country," many nations are imposing anti-dumping duty rates on Russia's exports, rates that are much higher than those paid by countries considered to have market economies. Moreover, if such sanctions are imposed against even just one enterprise, the penalties affect the entire industry to which it belongs.

As things stand today, Russia's ferrous-metals exports are restricted by 34 types of sanctions imposed by 35 countries. In addition, 24 anti-dumping investigations are under way. According to many experts, these sanctions rob Russia of some $1 billion a year.

If and when Russia enters the WTO, it will acquire the status of a country with a market economy and will enjoy most-favored-nation trading status with WTO member countries. In many cases, WTO membership would allow Russia to obtain the lifting of discriminatory sanctions against its metals exports, or at least to alleviate their impact.

RM: Does the Russian Union of Metal Exporters have the power to play a serious role in combating discriminatory sanctions and barriers? In which ways can it fight?

SA: Russia's steel exports to the United States are currently regulated by three agreements. The union, together with industry enterprises, put a lot of effort into preparing these agreements and pushing them through. Ignoring the existence of these agreements, the U.S. International Trade Commission has included Russia in a list of countries subject to investigation, designed to elaborate measures to protect the United States from excessive steel imports. Russian enterprises are involved in the investigation and are taking measures to defend their interests. Meanwhile, the Trade Commission has announced that the investigation has entered the phase of setting down specific protective measures. The commission is expected to draw its final verdict and submit it to the president on Dec. 19, 2001.

Further development of the situation will depend on what particular measures the commission will propose and the president's reaction to them. If it comes to the imposition of stricter restrictions on Russian steel exports, our union, together with the enterprises, will have no choice but to appeal to the Russian government for measures to support Russian exporters.

The agreement between Russia and the European Coal and Steel Community (ECSC) regulating supplies of certain kinds of steel products expires this year. In July, at the union's initiative – which was supported by the European Steel-Producers Association – a meeting of commercial managers from the largest steel companies in Russia and Europe was held. The meeting elaborated the main principles of a new agreement. Most important for Russia is the decision to increase Russia's 2002 quota by 32 percent and to introduce the so-called "short-supply" provision that allows for the quota to be exceeded in certain circumstances under mutual consent of the parties.

The Russian Union of Metal Exporters sent the meeting's protocol to the Russian Ministry of Economic Development, the Russian Foreign Ministry and the Russian Ministry of Industry, Science and Technology for consideration as a basis for a new agreement with the ECSC.

RM: Russia's steelworks have been pushed into the red by continually increasing electricity and railroad rates. What can the Union of Metal Exporters do about the situation?

SA: The metals industry is a major consumer of fuel and electricity, accounting for some 25 percent and 40 percent of the country's gas and electricity consumption, respectively.

Unfortunately, relations between the producers and consumers of fuel and electricity are far from perfect because of the high degree of monopolization and the inefficiency of government attempts at tariff regulation. The result is the intolerably high share of fuel and electricity costs in the total production costs, which currently averages 25 percent in the domestic steel industry.

To improve the situation, it is necessary to take appropriate measures at the federal level of authority, at the level of the regional governments and at the enterprises.

At the federal level, it is necessary to implement a radical restructuring of the so-called natural monopolies, namely Unified Energy Systems and Gazprom.

On the regional level, it is necessary to put an end to the practice of cross-subsidizing, i.e. setting elevated rates for industrial consumers and favorable rates for order categories.

At the enterprises, it is necessary to speed up the introduction of energy-saving technologies and equipment modernization.

Railroad rates are so high that the share of railroad transportation costs has climbed as high as 35 percent of the total at some enterprises, putting them on the verge of losing their cost-efficiency and competitiveness.

The Union of Metal Exporters monitors the situation and regularly carries out economic analyses of the costs incurred by the industry due to the natural monopolies, elaborates proposals and submits them to the appropriate federal organs.