A Second Opinion on Freeing Russia's Oil Prices

In response to "Free Oil Prices or Face Shortages, Economists Say," by Anne Barnard, Nov. 24.





Editor:


Your article discusses the freeing of domestic fuel prices and export quotas in Russia -- two regimes which impact the Russian economy and, in particular, those foreign and Russian companies involved in oil exploration and production.


I believe that increased inflation will be an inevitable result of free domestic fuel prices in Russia. While the promotion of more efficient energy utilization and increased exploration and production might at some point justify domestic price increases in spite of inflation, it would be dangerous to set policy without understanding the associated costs to the general economy.


The argument that increased profitability within the Russian oil industry will increase state revenues is short-sighted. The lack of payments between upstream and downstream sectors of the industry will simply grow more acute, thus causing more contraction upstream. Ultimately, Russian producers will leave more oil in the ground rather than add to their already overburdened receivables. Greater fuel efficiency will develop, but the short term costs will be high.


I presume that the article misprinted the word "export" instead of "excise" with respect to the currency denomination of the tax base. Higher domestic prices will not affect export tariffs, but they will ostensibly increase excise taxes paid by producers if current levels of production were maintained. However, the higher excise tax burden will further cripple joint ventures operating under questionable economic viability. If domestic markets cannot pay for higher-priced crude, and if export tariffs are not reduced to offset the excise tax increase, many of these ventures will shut down.


I was surprised that the article did not mention capacity limitations within the existing oil export regime. Pipelines and terminals are currently operating at near capacity. It is therefore not clear that lifting quotas will render any noticeable effect beyond shifting the export complications from a cost-based problem to a capacity-based problem.


John B. Fitzgibbons, president


Ural Petroleum Corporation





Cleanliness and Culture


In response to "Why This Place Is in a Mess," by Jo Durden-Smith, Nov. 15.





Editor:


Durden-Smith's column left me with the impression that Russians pollute the environment because (1) we've got plenty of land to spoil and (2) because the communist ideology perished together with their subbotniki, and now nobody cares about the environment because "there is the freedom to throw what you want where you want."


Reasoning like this is entertaining, but confusing. There is no connection between the size of the country and the carelessness on the streets, believe me. It has, on the other hand, a lot to do with is one's level of culture. Education. Upbringing. It's universal!


Does Durden-Smith know that some Russian smokers tuck their burnt matches under the bottom of their match box after lighting a cigarette?


The mess has to do with Communist ideology as well. It destroyed the cultural level of the nation, and the new generation followed the example of their parents, who were concerned only with fulfilling the plan at any cost and who had no time to think of the environment.


But now Russians do care about the environment. In a recent poll in the weekly paper Argumenty i Fakty, Muscovites ranked ecology and sanitation as the third most important problem today, after only crime and inflation and ahead of such issues as housing and employment. Doesn't this compare with attitudes in Europe generally?


Finally, the Russian word subbotnik does not refer, as Durden-Smith suggests, to clean-up brigades but to the days when the Communist authorities called on citizens to help clean their neighborhoods or do other civic projects.


Yakov Fomenko


Moscow





What Did You Expect?


In response to "Wipe That Idiotic Grin Off Your Face!," by Jean MacKenzie, Nov. 19.





Editor:


Cheer up, Jean, you are already in the second stage of Russia's three-stage adaptation process. The first was pink-cheeked enthusiasm, the second is oldtimer's gloom and the third will be long-time residents' cheerful pofiggizm (don't-care-a-fig lifestyle).


Foreigners come here for lots of reasons: Some want to smell the "scent of the wild;" some are seeking adventures; others come just for fun. But only few really know where they're going. Maybe you should have known better.


Even those who seek the notorious scent of the wild, who are eager to meet polar bears and other wild creatures in the streets, still hope secretly that those bears are at least tame, if not mere puppets. And how scared you are when you come to admit that there are real bears out there (though two-legged ones).


I feel sorry for you, but weren't you looking for adventure? You've found a plenty of it, so why aren't you happy now? Russia is a generous land: If you ask for a slice of bread, you'll get a loaf. If you ask for a pinch of trouble, you'll find yourself in it up to your nostrils.


If you get scared, if you find it intolerable here, you can well go home. You can escape. But we Russians cannot, we are at home. Even those who emigrate forever go to strange lands, but leave their homes and their hearts here. Isn't this a worse woe than yours?


Tatyana Katrayeva


Moscow