• 2016 October 24

    Stinging FAS

    Federal Antimonopoly Service of Russia, supported by Russian Railways, initiates a new stinging attack on stevedoring business. Head of FAS Igor Artemyev  threatened some stevedores with higher berth rent having accused them of being greedy and moving their resources offshore. How fair are those accusations?

    Investors to be washed out?

    At the meeting of Russia’s antitrust watchdog in Yalta, head of FAS Igor Artemyev launched a stinging attack on stevedoring companies. The Federal Antimonopoly Service accused the stevedores of moving their resources offshore with no investments in modernization of ports. The other key concern is about invoicing of Russian companies in foreign currency, which, following the rouble devaluation, boosted their logistical expenses by 1.5 times, FAS says. Both claims are disputable.

    In fact, port industry in Russia is showing the increase of cargo throughput despite the crises. It has exceeded all the records of the soviet period. Sea terminals are developed to a great extent with private investments, unlike highways and railways. There are multiple examples of creation, modernization and development of port terminals: construction of an avantport Bronka in Saint-Petersburg, creation and modernization of coal terminals at Vostochny, Ust-Luga and Vysotsk ports, development of port infrastructure in Taman, new terminals in Ust-Luga, etc. Moreover, Russian port industry is successfully implementing its strategic task on shifting Russia’s foreign trade cargoes to domestic harbours as it were Baltic republics which benefited most of ‘soviet heritage’ in this sector. If all profit was moved offshore or was spent for dividends, there would be nothing.

    As for rouble devaluation, FAS somehow does not take into consideration the fact of Russian exporters’ revenue in foreign currency. They also take advantage of rouble devaluation. Nothing has changed for them in this respect. The other thing is the fall of prices in the global market, which had an impact on the exporters (like Rusal) or partial loss of markets amid competition. Yet, they could invest in construction of their own port facilities in advance (as many forward-looking companies did). Now, stevedoring companies and those who used to invest have to pay for those who did not want to invest in Russian ports.

    Besides, FAS does not take into account the cost of fund raising in Russia, the terms of credits included into tariffs or the procurement of foreign equipment (also paid in foreign currency), as we wrote before >>>>

    What to FAS and Russian Railways suggest? Igor Artemyev  says stevedoring companies should invoice Russian companies in roubles while exporters will continue to get their revenue in foreign currency. Otherwise, the ports are threatened with fines or even with higher berth rent. In most cases the berths are held by FSUE Rosmorport which is running its own business rather than following someone’s instructions (moreover, privatization of FSUE Rosmorport has been under discussion for a long time).  

    Vice-President of Russian Railways Salman Babayev  has addressed FAS with a proposal to introduce direct control of prices for stevedores’ services or to look into lifting of restrictions on pricing of export cargo transportation by railways, also in the framework of a tariff  corridor, and setting of a mechanism to fix an allowed share of transport component in final price of products with a specified structure for distribution of service costs between the participants of the entire transportation chain. These ideas were previously voiced by FAS. If the idea of setting a mechanism for fixing of a transport component  and introduction of direct price regulation is put into practice Russian ports are not likely to see any investments any more. Making a private company’s profit depend on fluctuation of prices for the product of its client would mean renunciation of the market economy principles.  Moreover, enforcement of this mechanism would require an army of officials to monitor the tariffs and to analyze their compliance with the requirements. Among the implications there will be administrative pressure on business, conditions for corruption, the growth of budget expenses. FAS will turn into a superstructure with the activities overlapping those of the ad hoc ministries and agencies.

    Of course, there are cases of abusive practice at port terminals. Therefore, a selective approach is needed instead of breaking of the entire system which was quite a success before.

    Vitaly Chernov