Pipes under new conditions of WTO

After Russia’s accession to the WTO the disputes on the effectiveness of this measure for the Russian economy are still underway. The situation is not clear not only for the population fearing price escalation but also for the market actors who are forced to accept new rules of the game now. Industry experts believe that, in the new conditions, Russian fuel and energy companies can receive a real advantage due to lower duties on pipes, various types of which are used for the construction of oil and gas pipelines, as well as for drilling and well operations. Will the Russia's entry into the WTO enlarge the possibilities of fuel and energy companies? Will accession to the WTO help increase competition in the production of pipes? Industry experts answer these and other questions.

According to Sergei Zhavoronkov, a senior expert at the Institute for Economy in Transition, “usually, metallurgy is considered as one of the sectors that will clearly benefit from the accession to the WTO, but the situation is not so simple. If we look at, say, the market for pipes for the oil industry, then we will see that around two thirds of domestic oil companies' needs are met by Russian producers. There are, by and large, three of them: TMK, OMK and the Chelyabinsk Pipe Rolling Plant. About less than a third of pipe products are imported by us, this is due to the fact that some of the pipes needed for the oil industry are simply not produced in Russia, we have not learned yet, and some of them are simply easy to import, even despite 15-20% customs duties. After Russia joins the WTO, the duties will be reduced significantly, and our metallurgists will face a serious competitive problem, primarily related to the competition with Ukrainian rivals. Now we are speaking about the access of Ukrainian pipes to Russia. In addition to quotas that are, in fact, a political issue and result of intergovernmental agreements between Russia and Ukraine, we introduce prohibitive tariffs up to 38%. Accordingly, the opportunities we have in this instance for this kind of protection will be substantially reduced with the accession to the WTO, and the competition for Russian pipe producers will become significantly tougher, more intense. We can say that it will be beneficial for the consumer, that is, the oil industry. Perhaps yes. But if we are talking about metallurgy, then, in general, its owners have a lot to think about in connection to the future more intense competition”.

Nikita Krichevsky, PhD, Professor, believes that “ the accession to the WTO is a stimulus for the governmental intervention for the construction of new pipe plants in the eastern part. That is what no one talks about, although Japan is up for every move. Why not to talk to the Japanese about Japan's possible participation in the construction of steel plants, for example, on one of the four Kuril Islands? And why not? And let Japan think, since we have made suggestions about a peace treaty and the disputed territories.

Today we are moving in the wake of common rules established by the WTO. And I believe that the presence of the state in the pipe industry has to focus primarily on the creation of new capital facilities and on the modernization of the existing ones, again in accordance with the requirements of consumers. Q: where is the money? A: like Koschei over the gold, we are sitting on over nearly five trillion rubles in reserves. Why do we put them in US government bonds at under half a percent per annum instead of developing Russian industry and infrastructure, especially in Siberia and the Far East, since the ministry has not been created for nothing? This is a stimulus. It is a question which in one way or another will take up more and more space in the discussions on how to further the socio-economic development of the country in any case, because all the objective circumstances indicate that we are gradually losing other options. Today in the West you will not get cheap liquidity – there is simply none there. They have their problems. At the same time, we have significant resources, which today lie dormant and are not invested in the economy. The question arises as to whether inflation will take place, as the Liberals are predicting. I have several counterarguments for them. First, today in Europe and the US money printing is skyrocketing, and yet there is no inflation, on the contrary, there is a money deficit. And secondly, we direct these funds not at the consumer market, which, of course, may lead to some increase in consumer prices, we direct them at the creation of capital value. This is a fundamental difference. And this, by the way, is in tune, if we are talking about the pipe industry, with one of the first provisions of the presidential decree on the establishment and modernization of 25 million new jobs.

Where to take them from? Here they are. This was one of the first decrees of President Putin. And it is not about creating jobs, as erroneously interpreted by the media, but mostly about modernization, but also about creating too, because in any case we cannot create 25 million jobs. Let us not talk about the situation on the labor market in the country, but to a large extent modernization was talked about. As a solution to this problem, by the way – a tip for the government – there is a pipe market”.