A Foreign Trade Ministry official has defended a government decision to back away from liberalization of oil exports, saying that fixed state orders would encourage oil firms to produce more.


Mikhail Gaikazov, deputy head of the department that oversees imports and exports for state needs, said Thursday that the cabinet's preliminary decision to replace export quotas on oil with required levels of domestic sales would probably be implemented in January.


The World Bank, supported by prominent Russian reformers, has rejected the plan as a de facto continuation of export quotas, arguing that domestic sales requirements would determine the amounts of oil left for export, effectively leaving export quotas in place. The bank threatened to withhold a $600 million loan it had made conditional on abolition of the export quotas.


But Gaikazov said that domestic quotas, which would require oil companies to sell a certain amount to the state, would encourage firms to produce more to obtain export revenue.


"It's a major stimulant to produce more oil than ordered by the state," Gaikazov said. "It will stabilize oil production."


Gaikazov predicted an end to the fall in production in 1995, and modest growth in 1996. The Fuel and Energy Ministry has said that crude-oil output will fall 11 percent this year, to 314 million tons.


If state requirements were not introduced, the abolition of export quotas would not boost production but merely encourage companies to sell existing production abroad, Gaikazov said.


Domestic prices will rise only gradually, making it profitable to sell on the domestic market only in the long run, he added.


Because access to Russia's pipelines will be limited, a ministry commission will decide which firm gets access, Gaikazov said. Original proposals by advocates of trade liberalization recommended equal access, proportionate to production levels.


Gaikazov said the plan would also encourage smaller oil firms to join the large conglomerates, such as LUKoil, that now dominate the country's single pipeline, in order to obtain access. Russia's government has long favored these conglomerates, which incorporate most steps of the production process.