Email This Post - Print This Post Print This Post

There’s an old saying – not everyone with a knife is a cook.

Take the EU trade commissioners, for example, and the European Commission’s Directorate-General III (Industry). For years, these appointees of every European manufacturing interest, large and small, have hectored audiences in Moscow about the desirability of reform in the Russian steel industry. They even dispatched a group of consultants, dressed up to look as if they were technical experts, for the purpose of persuading Russian steel mills to junk their old open hearths and modernize with all the new technology the Germans and Italians could sell them. Those who refused to buy European machinery were doomed, the experts forecast, and should be shut down.

That was cooking the Euro way. But the knife was meant to cut for a different purpose. However, the targets didn’t die as the Europeans intended. Not only has no major Russian steelmaker closed down -they have consolidated and prospered, largely through exports. It is the European and American steelmakers who have been dropping instead.

When Russian steelmakers followed the Euro recipe, upgrading their equipment to manufacture higher qualities of crude steel and higher-value steel products, they discovered their benefactors in Brussels were upset, rather than pleased. You see, Euro steelmakers came to bury Russian steel competition and, when that failed to work, they tried every trade limitation trick in the book.

For six weeks now, at the insistence of their steel men, the European Union has been sabotaging Russian steel exports. According to Russian steelmakers, the result is that more than 80,000 tons of their products are stuck in limbo, either unable to be shipped from Russian ports or unable to be delivered out of customs warehouses on the European side of the border.

Andrei Sidorov, spokesman for Novolipetsk Metalworks, says that this volume of steel “is stuck in ports and warehouses as a result of the imposition of unilateral restrictions by the EU and delays in defining what documents are required by the EU to custom clear these exports.”

The cargoes affected are products the steel mills made and loaded to consumers in December. Legally, according to the steel treaty of 1997 between Moscow and Brussels, they are subject to regulations that existed until Dec. 31, 2001, when the treaty expired.

What has happened is that, despite claims from the EU that Russian steel production of December can be imported to the EU under the old agreement, no administrative decision or customs instruction has been issued on how to clear steel after a Dec. 29 announcement was made in Brussels on new import quotas.

In that move, the EU decided to add boron-alloy steel onto the list of Russian imports that will be subject to quota limits this year. Boron-alloy steel is one of the higher-quality products the Brussels cooks used to recommend to Russian steelmakers five years ago. Now that the mills are exporting a half-million tons of it per year to Europe, the cooks have come up with a way to stop it.

Last year, the EU quota for imports of Russian steel totaled 817,000 tons. For this year, the quota volume should be the same, Brussels insists, but the list of products must be expanded to include boron-alloy steel. The only way to satisfy the new quota is to ship half a million tons less steel.

Of course, Russia’s trade negotiator Maxim Medvedkov didn’t agree to this proposal when the Brussels cooks tabled it in mid-December. Two weeks later, they announced the new quota limit on boron-alloy steel without waiting for a new agreement. And if that wasn’t knifing enough, the Brussels cooks have tied up all the boron-alloy steel that was shipped between Dec. 29 and 31.

The steelmakers say their plants have already sustained losses because of the stoppage of the trade. “Either we wait to ship the metal as part of this year’s quotas,” one of them said, “or we wait until the situation is cleared on the intergovernmental level. Whatever we do, we must wait and pay for storage of metal, as well as penalties on unfulfilled contracts.”

The Russian steelmakers say they hope government officials will resolve the dispute at a meeting of representatives late this week. Trade Ministry officials in Moscow say they cannot confirm whether a new steel-trade agreement with the EU may be initialed at the talks.

Until the agreement is ratified, steelmakers say the Russian Trade Ministry will issue licenses for exports subject to quota limits in the expired agreement, but not licenses for the new list of exports proposed to be limited by the EU this year. Practically speaking, this means that boron-alloy steel can neither be licensed for export by the Russians, nor cleared for import by the EU.

The mills estimate their losses from introduction of the new trade quotas for boron-alloy steel will be about $80 million this year.

Leave a Reply