INTERVIEW: Russian antitrust expects no Gazprom split soon

MOSCOW, Oct 31 (PRIME) -- Russian gas giant Gazprom will not spin off its production and transportation businesses in the foreseeable future because its reorganization will be difficult in the current difficult times, Federal Antimonopoly Service’s Director Igor Artemyev told PRIME in an interview on Monday.

“I think that the government has defined a clear position, and there will be no split in the next several years. No one will risk doing serious reorganization in crisis times,” he said.

Gazprom should fall into hibernation because no one will dare to touch Gazprom as it has to provide gas to the Russians and contribute to the budget. “As I see it, a large-scale reorganization will be difficult until warmer times come in the development of our economy,” Artemyev said.

The disagreement of the government to increase of the transportation tariff for independent gas producers through Gazprom’s pipelines by 2% from July 1 will affect the company’s investment program, but the service has already taken it into account.

“They did not receive their indexation. But we took it into account now in forming the next year’s tariff – it will not amount to 2%, but to 3% from July 1 next year. We have partially took it into account and compensated that,” he said, adding that the service does not plan to increase the tariff before July 1, 2017.

“We assume that it will not happen. Gazprom has to take some time and cut costs, sell non-core assets, and increase efficiency of its operations. They are doing nothing of the kind,” he said.

RUSSIAN RAILWAYS

The service thinks that Russian Railways’ coal transportation tariff must be increased as the company should not subsidize the coal industry. The service is not discussing a higher baseline railway cargo transportation tariff by 4% in 2017, but Russian Railways loses money on transportation of some types of coal.

Previously, coal transportation was cross-subsidized by oil export transportation. “But mistakes in the tariff policy made oil companies switch to the pipeline transport. And railways lost a major part of the most profitable cargo…This is why while working on the 10-01 price list, we have to announce grim news for coal companies,” Artemyev said.

“We understand that a healthy economy should be based on the principle that nothing must be transported at an under cost. We support Russian Railways in that, as the only alternative here are budget subsidies for coal. But the company should not provide an industrial subsidy to the whole coal industry. This is why the tariff for coal transportation should be increased,” he said.

But the service also stands for introduction of flexible railway cargo tariffs, which may take into account the seasonal character of transportation, he said.

Still, Russian Railways have to cut significantly more costs. In August, CEO Oleg Belozyorov said that the company had cut 43.7 billion rubles of costs in January–March and 9.3 billion rubles more by August. Artemyev said that the service is not satisfied with the results, and the company is able to do better, but the trend is positive.

PRICES

The service also expects prices for citrus fruits to fall after the Turkish producers return to the market thanks to the government’s October 11 ruling.

“The prices can and should fall after the return of competition and strong Turkish players, who had to leave the market due to well-known events. This will actually affect price stabilization,” he said.

The governed is now also discussing the idea of abolishing regulation of prices for cheap life-saving medicines. “Yes, we are discussing it, but I think it will not happen. It is careless to just untie prices in the current conditions. We should only increase the maximum allowed price to a certain degree,” he said.

“I think it would be a correct decision to increase the maximum price for medicines (that are to cost no more than 10 rubles) to 50 rubles. Our people are crafty, they will raise prices for these medicines to 100 rubles and more if we just abolish the regulation. We’ve had a twofold devaluation, so if your medicine cost 10 rubles, it has to cost about 20 rubles, if you buy foreign raw materials.”

COMPETITION

Prime Minister Dmitry Medvedev has ordered all ministries and authorities to work out road maps for development of competition in their industries by March 1. The draft plan includes actions in many industries, and also lower state participation in the economy.

But Russia has many monopolies in the competitive sectors like transport, healthcare, and education. “We should change the situation for the better,” he said.

(62.9037 rubles – U.S. $1)

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