What's happening at the
Monday 21 Aug 2017 | 11:02 | SYDNEY
Monday 21 Aug 2017 | 11:02 | SYDNEY

Putin no man of steel

By

COMMENTS

23 June 2010 12:55

Associate Professor Stephen Fortescue is a Russia specialist at the University of New South Wales.

This is my first offering to The Interpreter; I hope it is the first of many on Russia's politics and economy.

A few weeks ago there was considerable excitement in Moscow when the head of the Russian competition agency informed Prime Minister Putin that a case of price gouging had been brought against the steel and coal producer Evraz. Evraz is 40% owned by Roman Abramovich, of Chelsea Football Club fame. (Australian readers might know of Evraz for its brief involvement with the Cape Lambert iron ore project.)

For some, this was a sign of Abramovich's waning star or a new attack on the oligarchs. The case was indeed part of a much broader campaign against the privately owned steel sector – with it then spreading to non-ferrous metals – from customers reacting to sudden and sharp price increases. Many of those customers are state-owned or dominated, and include the oil and gas sector, the car industry (AvtoVAZ, the producer of the Lada, in particular) and Russian Railways.

Putin followed up by calling a meeting of all the major players, at which he declared the issue resolved. But there was no indication that the metal producers had agreed to reduce their prices. Indeed, the meeting took place the day after AvtoVAZ had caved in and accepted the price increases demanded by its supplier of sheet metal, Severstal, after the latter had cut off deliveries.

One can argue about the level of competition within the Russian metals sector — part of its Soviet legacy is a market divided among specialised producers. But it is overwhelmingly privately owned and certainly fiercely competitive in global markets. If its state-owned customers were trying to use their 'administrative resource' to get their way, they seemingly failed. It's not unusual for Putin to behave more benignly towards private big business than his rhetoric suggests.

Photo by Flickr user crowbert, used under a Creative Commons license.

You may also be interested in...