RESTRICTED
WORLD TRADE WT/ACC/RUS/18
11March 1997
ORGANIZATION(97-0981)
Original: English
ACCESSION OFTHE RUSSIAN FEDERATION
Information onState-Trading Enterprises oftheRussian Federation
ThePermanent Mission oftheRussian Federation hassubmitted thefollowing information
onState-Trading Enterprises oftheRussian Federation, withtherequest thatitbecirculated tothe
Members oftheWorking Party.
_______________
TheRussian Federation iscollecting thestatistical information, inorder tofulfilthenotification
andtransparency requirements ofArticle XVII. TheRussian Federation alsonotes thatthose enterprises
which havebeengranted exclusive orspecial rights orprivileges intheexercise ofwhich theyinfluence,
through theirpurchase orsales, thelevelordirection ofimports orexports, make suchpurchases and
salesonthebasis ofcommercial considerations.
TheRussian Federation states thatnineoutofthetenenterprises enumerated inAnswer 12
ofWT/ACC/RUS/9, which havehadspecial privileges from theGovernment, donotenjoy these
privileges anymore. Ontheother hand, after carrying outadditional examination interms of
ArticleXVIIofGATT1994andtheworkingdefinitionofState-TradingEnterprisesintheUnderstanding
ontheInterpretation ofthatArticle, fourother enterprises were identified aspossible State-Trading
Enterprises andarepresently notified.
TheRussian Government intends tocontinue itsanalytical andfact-finding work regarding
identification ofother possible State-Trading Enterprises interms ofArticle XVII ofGATT 1994and
theUnderstanding oftheInterpretation ofthatArticle. Itwillpromptly notify them withfullrespect
tothenotification andtransparency requirements ofArticle XVII ofGATT 1994. TheRussian
Government alsoinvites interested members oftheWorking Party toindicate those Russian enterprises,
which theyconsider asState-Trading Enterprises under theGATT 1994.
I. ENUMERATION OFSTATE-TRADING ENTERPRISES
TheRussian Federation maintains anumber ofenterprises covered byArticle XVIIGATT 1994
andtheUnderstanding ontheInterpretation ofArticle XVII. These enterprises andtheproduct/products
forwhich they havespecial powers arelisted below:
(i) Russian jointstock company (RJSC) Gazprom -natural gas;
(ii) Russian jointstock company (RJSC) UESofRussia -electricity;
(iii) Joint sockcompany (JSC) Rosugol -coal;
(iv) Joint stock company (JSC) Diamonds ofRussia-Sakha (ALROSA) -rawnatural diamonds;
and
(v) Stateenterprise (SE)Almazyuvelir Export Foreign Trade Association -rawnatural diamonds.WT/ACC/RUS/18
Page2
II. REASONANDPURPOSEFORINTRODUCINGANDMAINTAININGSTATE-TRADING
ENTERPRISES
(i) RJSC Gazprom
Gazprom isapublic jointstock company organized byRussian Presidential Decree No.1333,
dated 5November 1992. Thecontrolling block ofshares (40percent) inGazprom isowned bythe
State (State Property Management Committee oftheRussian Federation).
Gazprom hasbeenestablished andoperates forthefollowing purposes:
- management ofproduction ofanimportant domestic resource (natural gas);
- expansion ofthedomestic output ofnatural gas;
- promoting theachievements ofaneconomy ofscale intrading operations, and
improvements intheterms oftrade; and
- continuity andstabilization indomestic supplies ofnatural gas.
(ii) RJSC UESofRussia
UESofRussia wasorganized asapublic jointstock company in1992byaRussian presidential
decree. Thecontrolling block ofshares (51percent) inthecompany isowned bytheState (State
Property Management Committee oftheRussian Federation).
UESofRussia hasbeenestablished andoperated forthefollowing purposes:
- management ofproduction ofanimportant domestic resource (electricity);
- expansion ofthedomestic output ofelectricity; and
- continuity andstabilization indomestic supplies ofelectricity.
(iii) JSCRosugol
Rosugol hasbeentransformed intoajointstock company from astateenterprise byRussian
Presidential Decree No.168,dated 9February 1996. Thecontrolling stakeinthejointstock company
isowned bytheState (State Property Management Committee oftheRussian Federation).
Rosugol hasbeenestablished andoperated forthefollowing purposes:
- Government ’sintermediary insupporting income ofdomestic producers ofcoal,which
istrade neutral;
- decrease ingovernment spending;
- management ofanimportant domestic resource (coal); and
- stabilization ofdomestic supply.
(iv) JSCDiamonds ofRussia-Sakha (ALROSA)
ALROSA wasorganized asapublic jointstock company on26November 1992, byRussian
Presidential Decree No.1481 “OnaDiamond-Mining andMarketing Joint-Stock Company ”dated
26November 1992. Atotalof30percentofALROSA shares areowned bytheState(State Property
Management Committee oftheRussian Federation), another 30percentbytheGovernment ofthe
Republic ofSakha (Yakutia), yetanother 20percentbyALROSA staff, andtherestbydifferent legal
entities andindividuals.WT/ACC/RUS/18
Page3
ALROSA hasbeenestablished andoperates forthefollowing purposes:
- management ofanimportant domestic resource (rawdiamonds);
- promoting theachievements ofaneconomy ofscale intrading operations, and
improvements intheterms oftrade;
- Government ’sintermediary insupporting income ofdomestic producers ofraw
diamonds, which istrade neutral; and
- fulfilment ofinternational commitments regarding quantities andprices.
(v) SEAlmazyuvelirexport Foreign Trade Association
Almazyuvelirexport wassetupinthe1950s. Itspresent-day tasks andfunctions havebeen
defined byRussian Government Resolution No.948“OntheJoint-Stock Company ofDiamonds of
Russia-Sakha ”dated 1December 1992. Almazyuvelirexport isstate-owned enterprise andaccountable
totheRussian Ministry ofFinance.
Almazyuvelirexport hasbeenestablished andoperated forthefollowing purpose:
- toensure increases ingovernment revenues through exports ofspecified quantities of
rawnatural diamonds.
III. DESCRIPTION OFTHE FUNCTIONING OFTHE STATE-TRADING ENTERPRISES
(i) RJSC Gazprom
Gazprom engages inthefollowing:
- geological exploration andprospecting;
- wellsinking;
- production ofnatural gas,oil,andgascondensate, aswellasanumber ofnatural
by-products;
- processing ofnatural gasandgascondensate;
- construction andoperation ofunderground storage fornatural gasandproducts ofits
processing;
- supply ofgas,gascondensate, oil,andproducts oftheirprocessing andrefining to
consumers;
- export ofgas(including theexclusive righttoexport natural gasunder international
agreements);
- distribution ofgasasmotor fuel;
- manufacture ofgasindustry equipment;
- building ofnecessary mechanical engineering equipment;
- construction andassembly operations;
- R&D;
- construction, reconstruction, andoperation ofanintegral network ofRussian gas
pipelines; and
- import ofnecessary products, work, andservices.
Gazprom isthelargest producer ofnatural gasinRussia andelsewhere intheworld. In1995,
itwasresponsible for94percentofgasproduced intheRussian Federation and22percentofthat
produced worldwide.WT/ACC/RUS/18
Page4
Gazprom 'sspecial privilege within themeaning ofArticle XVII ofGATT 1994 isduetothe
factthatithaslicenses todevelop 92gasandgascondensate fields which account for66percentof
theRussian Federation 'sexplored natural gasreserves and,stillmore importantly, owns 100percent
ofRussia 'sgridofhigh-pressure pipelines (114,000 kilometres).
Gazprom hastherighttobothexport andimport natural gas.
Gazpron isconducting itsexport andimport operations inaccordance with commercial
considerations.
According toRussian legislation, private traders arealsoallowed toimport andtoexport natural
gasonmarket principles. From thelegalpointofview, thereisfreecompetition between private traders
andGazprom asaState-Trading Enterprise, butinfact,Gazprom hasanearly complete monopoly
onnatural gasreserve, production andgaspipelines inRussia, thereisnofreecompetition inthisfield.
Inorder todetermine quantities ofnatural gastobeexported, Gazprom uses, forthemost
part,market principles. Theonlyexception isconstituted bylong-term natural gassupplies toformer
COMECON countries (Hungary, Bulgaria, Romania), whose annual amounts fortheperiod untilthe
year2000 have beendetermined byinter-governmental andstate-to-state agreements (such asthe
Yamburg Agreement andtheYamal Agreement) concluded during the1960s-70s. However, theshare
ofsuchdeliveries inthetotalvolume ofGazprom 'sexports hasbeensteadily onthedecrease and
currently stands ataround 10percent.
Theamounts ofnatural gasimports areextremely insignificant andarebased onswap
transactions, andaredetermined byGazprom onthebasis ofpurely market principles.
Export prices aredetermined byGazprom, forthemostpart,onthebasisofmarket principles.
Theonlyexceptionisconstitutedbytheabovelong-termagreementswithformerCOMECONcountries,
whose provisions include theprices ofsuchdeliveries. TheRussian Ministry ofFinance compensates
Gazprom forthedifference between these prices andworld average export prices fornatural gas.
Export prices fornatural gasaremuch higher thanitsprices onthedomestic market ofRussia.
Domestic gasprices areregulated bytheState. Themain objective forsuchregulation isconsumer
protection, especially social protection.
Gazpromconcludesandfulfilsnumerouslong-termcontracts.Thesecontracts(withtheexception
oftheagreements withformer COMECON countries already mentioned above) arebased onpurely
market principles.
Foreign equity participation inGazprom nowis1.15percent
(ii) UESofRussia
UESofRussia comprises more than70regional jointstock companies concerned withpower
generation andelectrification. These companies own600thermal power stations, 9nuclear power
stations, andmore than100hydroelectric power stations, which areresponsible forover90percent
ofallelectricity generated inRussia.
UESofRussia engages inthefollowing:
- inter-regional electric power transfers;
- balancing ofinterests ofregions having electricity surpluses andshortages;WT/ACC/RUS/18
Page5
- alleviationofpeakloadsbytakingadvantageoftimedifferencesbetweenRussianregions;
- construction andoperation ofpower generating facilities;
- construction, operation, andmanagement ofanelectricity transfer linenetwork; and
- export andimport ofelectricity.
Thespecial privilege ofUESofRussia within themeaning ofArticle XVII ofGATT 1994
isduetothefactthatitowns thevastmajority ofRussia 'spower generating facilities and,stillmore
importantly, 100percentofthecountry 'spower grid. Even those companies which arenotpartof
UESofRussia (forinstance, JSCIrkutskenergy) maysupply theirelectricity toother regions orreceive
electricity fromother regions onlyhaving agreed upontheiractions andconcluded arespective contract
withCentral Dispatcher Board ofUES ofRussia which carries outthetechnical andeconomic
management ofthenation 'sintegral power generation andsupply system.
UESofRussia hastherighttobothexport andimport electricity.
According toRussian legislation, private traders areallowed toimport andtoexport electricity
onmarket principles. From thelegalpoint ofview, there isfreecompetition between private traders
andUESofRussia asaState-Trading Enterprise, butinfact,ithascomplete monopoly ofelectricity
transfer linesinRussia.
UESofRussiaitselfdoesnotconcludeforeigntradecontractstosupplyelectricity.Suchcontracts
onitsinstructions areconcluded byanumber ofspecialized foreign trade firms, including theCentral
Dispatcher Board ofUESofRussia, JSCSigma, thestate-owned enterprise Technopromexport Foreign
Trade Association, andtheNational Energy Company.
Inorder todetermine quantities ofelectricity tobeexported orimported, UESofRussia uses
market principles.
Export prices aredetermined byUESofRussia onthebasisofmarket principles. Export prices
arehigher thanprices onthedomestic market. Domestic electricity prices areregulated bytheState.
Themainobjective forsuchregulation isconsumer protection, especially social protection. Electricity
imports areextremely insignificant andarecarried outaspartofbarter deals(electricity forelectricity)
through inter-regional transfers between CIScountries within theformer Soviet power grid.
UES ofRussia concludes andfulfils numerous long-term contracts onthebasis ofmarket
principles, withtheexception ofalimited listofstrategically important Russian consumers (military
andnuclear facilities) which cannot becutofffrompower supplies fornational security reasons even
intheevent oflong-term payment defaults ontheirpart.
(iii) JSCRosugol
Rosugol engages inthefollowing:
- restructuring ofRussia 'scoalmining industry;
- liquidation ofloss-making underground andstripmines;
- relocation ofminers andtheirfamily members fromcoalregions recognized ashaving
nofuture;
- measures todecrease subsidies forcoalmining inRussia;
- concentration ofcoalmining operations;
- implementation ofnewtechnologies andmodernization ofmines;
- leasing ofmining equipment;
- privatization ofunderground mines andstripmines;WT/ACC/RUS/18
Page6
- implementation ofuniform scientific andtechnical policies andre-equipment ofcoal
mining operations; and
- distribution ofinternal andexternal financial borrows torestructure thecoalmining
industry.
Rosugol comprises more than500underground andstripmines which areresponsible for
100percentofRussia 'scoaloutput. Rosugol isamong theworld 'sfivelargest coalproducing firms.
Rosugol 'sspecial privilege within themeaning ofArticle XVII ofGATT 1994 isduetoits
roleinthedistribution ofgovernment subsidies forcoalmining, andofexternal andinternal borrows
granted fortherestructuring oftheindustry against Russian Government guarantees. Rosugol alsoplays
animportant roleinthedetermination ofrates forthetransportation ofcoal. Thisisanespecially
significant privilege inRussia (where thereisnocoalbasin closer than3,000 kilometres totheRussian
borders), where itcostsRub.178,000/ton totransport thecountry ’sbestcoalfromKuzbass toMoscow,
while production costs amount toonlyRub. 98,000/ton.
Rosugol doesnotexport orimport coal.
According toRussian legislation, private traders areallowed toimport andtoexport coalon
market principles. From thelegalpoint ofview, there isfreecompetition between private traders and
Rosugol asaState-Trading Enterprise, butitshould betaken intoaccount asfarasRussian traders
areconcerned thattheirmarket behaviour isgreatly influenced byRosugol.
Theamountsofcoalexportsandimportsaredeterminedonthebasisofpurelymarketprinciples.
With account taken ofhugetransportation costs, export prices forcoalarecomparable toits
domestic prices ontheRussian market.
Rosugol doesnotconclude andcarry outanylong-term contracts.
(iv)(v) JSCDiamonds ofRussia-Sakha (ALROSA) andSEAlmazyuvelirexport Foreign Trade
Association
ALROSA engages inthefollowing:
- mining ofnatural diamonds inRussia;
- development ofthediamond mining industry;
- supply ofdiamonds tothedomestic market; and
- supply ofdiamonds forexport.
Almazyuvelirexport engages inthefollowing:
- supply ofdiamonds forexport.
Thespecial privilege ofALROSA andAlmazyuvelirexport within themeaning ofArticle XVII
ofGATT 1994 isduetothefactthat,inaccordance withClause 1ofRussian Presidential Decree
No.1481, dated 26November 1992, ALROSA hastheexclusive right tosellRussia 'srawnatural
diamonds onexternal markets (with theexception oftestlotsofnatural diamonds which aresoldon
external markets exclusively through Almazyuvelirexport).
ALROSA accounts forsome 98percentoftheRussian output ofnatural diamonds andfor
about 95percentoftheirexports.WT/ACC/RUS/18
Page7
Almazyuvelirexport isresponsible fortheremaining 5percentofRussia 'snatural diamond
exports.
Theproduction andexports ofrawdiamonds ishistorically considered inRussia ashaving
strategic importance forgovernment revenue purposes.
Under existing Russian legislation, rawnatural diamonds belong tothecategory ofproducts
whose freesalesonthedomestic market ofRussia areprohibited.
Allmined diamonds arerequired tobedeposited intheGokhran depository oftheRussian
Ministry ofFinance, fromwhich theyaresoldtoRussian cutting millsorforexport atprices determined
byALROSA andother producers. Proceeds from suchsales gototheaccounts oftherespective
producers.
Thequantity ofrawnatural diamonds which maybeexported isdetermined annually bythe
Russian Government intheformofexport quotas. Exports inexcess ofthese quotas may, ifneedbe,
carried out,butonlypursuant toaspecial Russian presidential decree.
Private traders inRussia donothavetherighttoexport rawnatural diamonds. There isno
freecompetition inRussia inthefieldofrawnatural diamond exports.
TherearenoState-TradingEnterprisesinRussiaasfarasnaturaldiamondimportsareconcerned.
Thisareaofactivity isafieldforfreecompetition, andfunctions onthebasis ofmarket principles.
Domestic prices forrawnatural diamonds inRussia areequal andsometimes higher thanthe
prices ofdiamonds supplied forexport.
While supplying diamonds forexport, ALROSA andAlmazyuvelirexport actonthebasis of
long-term contracts.WT/ACC/RUS/18
Page8IV. STATISTICAL INFORMATION
Commodity Unit Year Export Import Production
bySTEs Others BySTEs Others BySTEs Others
Natural gas billion cubic
meters1994
1995
1996*184.3
192.2
196.40
0
00
0
00
0
0536
527
53134
33
34
Electricity billion
kilowatt
hours1994
1995
1996*28.4
19.7
17.50.1
0.1
0.21.0
0.7
0.70
0
0870
850
83010
11
10
Coal million tons 1994
1995
1996*0
0
024.1
30.3
25.50
0
019.0
18.5
20.0261.1
254.4
247.00
0
0
Rawnatural diamonds billion dollars 1994
1995
1996*2.28
2.12
2.130
0
00
0
00
0
0
* Preliminary data