NEW EXCISE TAX ON VODKA COMING

Alcohol wholesalers predict that vodka prices will skyrocket by 15-20 rubles per bottle in early January.

Until presently, excise tax was split 50 to 50 between distilleries and local excise warehouses but, according to federal law No. 117 passed in July 2003, distilleries will pay 20% and the rest will be collected from local wholesalers beginning 1 January 2004.

By words of Gennady Reznikov, deputy chairman of Primorye Association of Alcohol Producers and Sellers, the government decided to use a proven method to replenish budgetary coffers. 16 taxes will be cancelled after 1 January, such an important source of budget revenues for regions as sales tax. Instead, regions were allowed to collect all excises and, to compensate for additional costs, wholesalers will have to rise ex warehouse prices by 15-20%.

While Russia's central regions will be able to sell their goods before New Year festivities, outlying regions, including Primorye find themselves in an unfavourable position. As Gepard company director Nikolai Korman says, travel time for goods to our region is more than one months. At present, there are stocks of alcohol in warehouses and same amount is coming, on which producers already paid 50% of excise tax.. This means that the government will collect 130% from these shipments.

"We approached local taxmen," says Gennady Reznikov, "but they were categorical: pay as set by the law." True, if someone of consumers lodges a court suit and wins, tax authorities may change their policy, he adds.

Another concern is that bootleggers gain an advantage over law-abiding producers. They will become more active, believes Nikolai Korman, and we may expect growth in consumption of self-made vodka and alcohol-containing substitutes. - Yury NURMUKHAMETOV.

TIME TO BUILD FLEETS

By words of Alexander Kirilichev, director general of one of Russia's largest shipping companies, this year was a year of expectations for Primorsk Shipping Company (PRISCO) and for Russia as a whole, which haven't come true yet by year's end.

PRISCO's hopes for development in coming 20-30 years are related on growth of cargo flows in Russia and this, in turn, directly depends on the outcome of the presidential election in March 2004.

The reason for uncertainty is declarations by the Finance Ministry and Tax Ministry that it is questionable whether implementation of projects to develop largest Russian oil deposits on Product Sharing Agreement terms is profitable for Russia. Revision of existing agreements would be highly undesirable for carriers transporting hydrocarbons.

"I have no doubt that PSA is the only right way," says Alexander Kirilichev. "Good enough, the Ministry of Economic Development supports these agreements. However, this issue will most likely be discussed by the new duma and the cabinet. If the cabinet remains the same, ongoing reforms will continue, though at a slower pace than we would like. Therefore, cargo flows will continue developing. During last two years, Russia's exports have grown by 29%. Its current potential in energy materials export is 350 million tons and will reach 560 million tons by 2010. This is a good prospect for carriers and shipowners.

PRISCO won two tenders in 2003 - on oil transportation for Sakhalin-I project and services to oil rigs for Sakhalin-II project. For the first programme, a contract for three Aframax tankers was concluded with the world's largest shipbuilding yard Hyundai Heavy Industries (Ulsan, South Korea). Keels for the 100,000-ton oil carriers will be laid in March 2005, and their commissioning is scheduled for 2005-2006. Preliminary works are under way, technical documentation is signed.

Brodosplit yard in Croatia continues building two 108,000-dwt tankers on PRISCO's order. The first ship named "Ostrov Sakhalin" was launched in December and is expected to be commissioned in March. The second tanker named "Governor Farkhutdinov" will be launched in May. Both vessels will work for Sakhalin-II project."

PRISCO returned one of its tankers under the Russian flag in 2003. Is it an exclusion or trend?

"There is a plan lying on my desk to return five more vessels of Ventspils type under the Russian flag," say Kirilichev. "I said repeatedly that it is very hard to work under a foreign flag. We are no man's ships and everybody can treat us badly. We wish to be protected by the government. The case of the Virgo tanker proves once again that it's no good to belong to nobody.

We should remember that if we buy something or make any investments, it is Russian investments and should be protected by Russia. That's why we are so keen about solving these issues.

We have a great hope that the law on second international register will be adopted in 2003. We have done very much to push it to PM Kasyanov's desk and to the State Duma. There are serious reasons to believe that it will be eventually passed." - Natalia KHOMENKO.

MORE COMFORT FOR PASSENGERS FROM VLADIVOSTOK TO NAKHODKA

A high-speed electric commuter train departed on its maiden trip from Vladivostok to Nakhodka on 29 December.

The 10-wagon train consists of cars of different class and provides snack bar and video system services. It will have less stops and, as a result, total travel time shortened by nearly half an hour down to 3 hours and 45 minutes. Fare varies from 105 to 135 rubles depending on wagon type. - Yevgeny ITAROV.

WASTE RECYCLING ASSOCIATION SET UP IN PRIMORYE

The main objective of the new association is to conserve the region's natural resources by expanding waste utilization and recycled materials usage, to encourage and coordinate recycling activities, to support recycling companies. It will also handle the target-specific regional programme "Waste."

Its chairman was elected vice governor Sergei Peredriy and the board included representatives of Ussuriisk carton factory, sanitary trucking company, trade house "Stroyitel," Research Institute for Nature Protection. 17 recycling companies already submitted membership applications. One of the association's greatest foremost targets is to construct a land fill for solid domestic waste in Vladivostok. 13 million rubles will be earmarked for this project from the regional budget in the next year. - Yevgenia YURCHENKO.

FISH QUOTAS ALLOCATION WILL BE SMOOTH

It seems that commercial fishery quotas for 2004 will be distributed without scandals. The State Fishery Committee did not have the guts to exclude companies violating fishery rules from the list of quota recipients. Only small and heavily indebted companies will get no quotas.

It seems that fishery officials yielded to strong pressure from fish producers. Senator Oleg Kozhemyako representing Primorsky Krai was one of most active supporters of the viewpoint that "a company as a whole cannot be punished for violations committed by one ship or one fraudulent shipmaster."

Judging by SFC's official data, the Far East's gravest violator of fishery rules was exactly Preobrazhenskaya Base of Trawling Fleet led by Oleg Kozhemyako before he became a senator.

Be that as it may, PBTF was Primorye's only large fishing company whose quota application was not officially accepted by SFC as of year's end. However, given senator Kozhemyako's high lobbyist potential, there is little doubt that PBTF will eventually receive appropriate quotas and smaller companies with similar or less severe violations may be punished instead.

Still, it seems that SFC's commission will not be able to complete quota allocation procedures in 2003 and many Far Eastern fishermen will have to celebrate the New Year at the quay. - Andrei BLINOV.

GOLD MINING SEASON IN FAR EAST

Primorye's gold industry is meeting serious problems, though Russia as a whole showed a trend to gold production growth and nearly all Far Eastern regions built up gold production availing themselves of a favourable state of the gold market.

The fact that gold production grew against the background of rising gold prices is indicative of good prospects for the industry. Evidence of this is growing interest on the part of domestic and foreign investors.

Unfortunately, Primorye cannot overcome lasting stagnation in this sector. Total placer gold production was only 80 kg, while licenses are available for an output several times larger. The gold season's leader in Primorye became prospector team Pioneer with about 20 kg, which was half of preceding year's production.

Gold production has been declining in Primorsky Krai for several consecutive years, despite even of continuous growth in gold prices. Other Far Eastern regions were quite successful - Yakutia built up gold production to 18.5 tons and Khabarovsky Krai produced more than 16 tons (+3.2% on 2002).

With more than 13 tons of gold, Amur Oblast high a record high output per one season. Nearly 4,500 tons of gold was produced on Chukotka. Smaller gold producing regions also were able to raise production. Jewish Autonomous Oblast produced 162 kg, almost twice more than a year ago, and Sakhalin producers yielded more than 250 kg for the first time in last ten years.

Primorye's gold industry also has good potential. By data of the geological department of the Natural Resources Office, the region could produce 600-700 kg of placer gold annually.

It was expected that the industry would overcome the lasting crisis in 2003. Once licenses were issued for Primorye's largest gold field in area of River Beshenaya (Pozharsky Raion, reserves at up to 1.5 tons), this deposit should have reach its design capacity by 2004 and produce at least 180 kg annually. However, not a single kilogram of gold was panned on Beshenaya in 2003. Its investor NaphthaTrans (Moscow), operating through a representation in Khabarovsky Krai, defaulted its contractual obligations before license holder Terra Ltd.

Experts say that the reason for the lasting recession in the industry is organizational problems of gold mining companies. Today, there are 28 licenses issued in Primorye for gold survey, exploration and prospecting to 16 companies. Small and financially weak they are unable to raise necessary investments. As a consequence, distribution of the region's subsurface continues.

As Mikhail Popov, director of the geological department of the Natural Resources Office, says that they repeatedly issued notices of possible revocation to license holders. A whole number of cases will be considered in January.

As a matter of fact, China shows interest to gold in Primorye and it is not unlikely that the Chinese will eventually have the most promising gold fields.

By "ZR" data, auction terms and conditions are already prepared for licensing a placer gold field in area of Chistyi Brook (Krasnoarmeisky Raion), with potential reserves at more than 200 kg. Vein gold deposits Salyut and Progress may be put out at auction in 2004. - Nadezhda OKOVITAYA.