EU details Russian 'trade distortion'

Market: Chemicals, Fertilizers, Metals, Natural gas, Petrochemicals
23/10/20

The European Commission today published a lengthy report on "significant" government-driven distortions in Russia's economy, focusing on energy, steel, aluminium, chemicals and fertilisers.

Trade commissioner Valdis Dombrovskis said the report is an additional "instrument" in the EU's toolbox to combat unfair trade. The 436-page report has been prepared for use in EU trade-defence proceedings.

The report details a range of distorting factors. Russian producers of nitrogen fertilisers, including ammonium nitrate, are competitive in global markets because of the low price of Russian gas, the report states. The EU has an anti-dumping duty of €32.71/t on Russian ammonium nitrate. Russian urea ammonium nitrate (UAN) carries anti-dumping duties of €27.77-42.47/t, depending on the producer.

Likewise, the profitability of the country's chemicals industry is "mainly achieved" through gas contract prices that are "significantly lower than world prices".

The commission notes that the lower cost of power in Russia follows on from the key fuels — coal, oil, natural gas and uranium — mainly belonging to state-owned firms. And it points out that energy prices are regulated by state-run monopolies to stimulate output.

The commission paints a similar picture for chemicals, citing the benefits of Russia's low domestic energy prices.

Regarding fertilizers and metals, the commission notes that there are also discounts for deliveries of specific goods. "Some of the big companies, such as Novatek, NLMK or PhosAgro were also benefiting from cheaper rates. The ... railway tariff reduction constitutes, in reality, state support, putting some producers in a privileged position."

For steel, the commission notes — somewhat more cautiously — that certain elements of the country's electricity, gas and rail transport pricing policies, as well as export restrictions on scrap, "may" contribute to lower costs of production and domestic and international deliveries.

And for aluminium, the commission sees private-sector Rusal benefiting from "some" state measures to strengthen the firm's position domestically and internationally, including preferential state funding for some projects, promotion of increased use of wrought aluminium on domestic markets and measures limiting market access for foreign producers.

By Dafydd ab Iago

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