Publication: Eurasia Daily Monitor Volume: 2 Issue: 16

Ukrainian steel pipe deliveries to Russia, traditionally a contentious issue, will undoubtedly figure high on the agenda of upcoming discussions on bilateral economic relations. Regime change in Ukraine adds a political dimension to the negotiations with Moscow on this major Ukrainian export article.

On January 13, Ukraine’s Ministry of Economics and European Integration and Russia’s Ministry of Economic Development and Trade signed an agreement on quotas of Ukrainian steel pipe deliveries for the years 2005-2009, in compliance with Russia’s anti-dumping regulations. The agreement ensures access to the Russian market for the Interpipe trust, controlled by Viktor Pinchuk, son-in-law of outgoing president Leonid Kuchma. Not covered by this agreement is the output from other Ukrainian pipe plants, including those controlled by Donetsk steel magnate Renat Akhmetov, who backed Viktor Yanukovych’s presidential bid.

This agreement distributes Ukraine’s quota for deliveries of small- and medium-diameter steel pipes to Russia among five plants of the Interpipe trust. These plants supply compressor, pump, boiler, roller-bearing, drilling, and oil- and gas-transport pipes and tubes, including seamless and stainless types. The quota for 2005 is set at 395,000 tons, with a 2% increment annually through 2009, again for Interpipe plants. This quota is approximately 100,000 tons lower than the annual quotas that had been in effect in 2001-2004 in this category.

Other Ukrainian suppliers of analogous products will, in practice, be excluded from the Russian market through application of a 20% anti-dumping tax. According to Ukrainian press reports, Economics Ministry officials who representing Interpipe’s interests managed to elbow the Industrial Policy Ministry, which favored rival interests, out of the negotiations with Russia on this agreement.

An overall agreement on Ukrainian steel pipe deliveries to Russia for 2005 has yet to be signed. The previous agreement was originally concluded for 2001 through 2003 and extended for another year. In 2004 it allowed a total of 715,000 tons of Ukrainian steel pipes to enter the Russian market not liable to the anti-dumping tax. That figure included deliveries of large-diameter pipes, notably 230,000 tons of tubes for oil and gas pipelines made by the Khartsyz plant. In mid-2004, Russia launched an anti-dumping investigation regarding Ukrainian steel pipe and tube deliveries, thus forcing renegotiation of the agreement that ultimately lapsed on December 31.

On December 28, the Ukrainian government forwarded to Moscow a draft agreement on deliveries for 2005, covering also the products of the Mariupol and Khartsyz steel plants, both in the Donetsk region. It called for suspension of anti-dumping and protectionist measures and for eliminating any quotas on large-diameter Ukrainian pipes and tubes of 820 millimeter and above. Russia’s Ministry of Economic Development and Trade turned down those proposals and insisted on continuation of the existing terms.

Kyiv forwarded a counterproposal on January 21. On January 25, President Viktor Yushchenko is scheduled to pay a visit Moscow. Ukraine’s new Minister of Economics and European Integration, Oleh Rybachuk, is coordinating the visit for the Ukrainian government.

Ukraine’s steel pipe output amounted to 2.03 million tons in 2004, almost identical to the 2003 figure. With more than one-third of that output dependent on the Russian market, the Kremlin will not be above using such leverage as part of attempts to keep Ukraine committed to the Russian-planned Single Economic Space. This situation underscores the importance of ensuring a more equitable access for Ukrainian steel products to the European Union’s market. The EU should clearly signal this intention during Yushchenko’s upcoming visit to Brussels.

(Interfax, January 12, 20, 21; UNIAN, January 18; Ukrayina moloda, January 21).