By John Helmer in Moscow
The Federal Antimonopoly Service (FAS), Russia’s anti-trust watchdog, announced this week that it has opened an official investigation of the State Customs Service (FTS).
The head of the FAS, Igor Artemyev, is a careful St. Petersburg apparatchik, who has made a 5-year career of running the anti-trust agency without getting out of step with his superiors. So it is surprising that the trust-busters have opened fire on the Customs men; it is understandable that it has taken them six months for them to pluck up the courage. The Customs agency is headed by Andrey Belyaninov, whose first career was in the KGB; and who came to the FTS in 2006, after running Russia’s arms export monopoly.
The target is an action the FTS ordered late last year to close down most of Russia’s customs clearance points at ports shipping ferrous scrap for export abroad. This measure has brought Russian scrap exports to a virtual halt in the Russian fareast, and cut the volume of exports to a trickle on the Black and Azov Seas.
Citing a provision of the antimonopoly legislation which bans administrative orders that hinder competition and limit free trade, and also a complaint from a scrap industry lobby organization, FAS issued a release this week, announcing it will commence its proceedings on June 10. A public statement by FAS, dated May 26, noted that the agency “suspects that FTS Russia violated the Federal Law «On Protection of Competition» by adopting acts that lead to restricting competition on the market of export of ferrous metals and limiting the rights of economic entities for selling, buying, otherwise acquiring or exchanging goods in the Russian Federation.”
Dmitry Kotikov, chiefspokesman for the State Customs Service, told CRU Steel News: “I can’t comment on the spot. We are aware of this information. I think our official position will be presented [on June 9].”
The text of theCustoms order no. 1514, dated December 2, 2008, prescribed just 10 customs points in the country from which scrap metal can be cleared for export. It took effect on March 31. The list of 10 exit points allows only one in the Russian fareast, and this is Petropavlovsk-Kamchatsky, at the southeastern end of the Kamchatka peninsula, on the Pacific Ocean. This port is more than a thousand kilometres northeast of the main Russian fareastern seaports — Vladivostok, Nakhodka, Khabarovsk, and Vostochny. To make legal customs clearance of scrap through this point would oblige exporters to ship it north first, and then south again to their customers — an impossibly costly journey.
Industry sources have told CRU Steel News that Russian exports of A3 steel scrap in the area go primarily to South Korea, China, and Taiwan, and the main clearance port has been Vladivostok. Last year, Vladivostok reports shipping 266,500 tonnes of ferrous and nonferrous scrap metal; the figure is estimated to be about one-quarter of all scrap exports from the Russian fareastern ports.
The Customs order also fixes Murmansk and Kaliningrad as the principal outlets for scrap in the Russian northwest; while Rostov-on-Don and Taganrog were named for the southern Black Sea and Azov Sea export trade.
The latest port reportsfor the four-month period to April 30 indicate that the falloff in A3 scrap export volumes has been dramatic. For the six Black and Azov Sea ports — Novorossiysk, Yeisk, Taganrog, Azov, Rostov, and Temryuk — the tonnage shipped has fallen from 571,000 tonnes a year ago to 51,000 tonnes this year. Rostov is the only one reporting shipments — 51,000 tonnes, compared to 427,000 tonnes in the first four months of 2008. Taking into account also the halving of price for scrap exports between last year and now, this also makes a difference in value between $230 million then, and $12 million now.
The latest report from St. Petersburg indicates that A3 volumes loaded aboard ship in the first three months of this year fell 88% from 496,000 tonnes to 59,000 tonnes — another loss of almost $200 million.
Although Kaliningrad and Murmansk were identified in the customs order as authorized clearance ports, scrap volume through Kaliningrad in the first quarter fell 29% year on year to 22,000 tonnes; no information is available from Murmansk.
For the six months since the closure order was first gazetted, no Customs official has beenwilling to go on record to answer questions about the order, or explain the rationale.