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Russia Inexplicably Short on Gas

July 29, 1999

MOSCOW (AP) _ Gas is scarce in many Russian regions, prices are jumping and Russians are asking themselves: How can one of the world’s largest oil-producing nations be running low on gas?

The main culprit is rising world oil prices, which have pushed up prices at the pump worldwide _ and have prompted Russian oil companies to funnel their fuel to lucrative foreign markets instead of those at home, where prices are significantly lower.

But some observers say this summer’s gasoline troubles stem from a mixture of smaller problems that wouldn’t cause much damage if Russia had a reliable system of distributing and monitoring its gasoline.

``When people say things will be stable again by September, they forget that our market is still completely unbalanced,″ economist and former government adviser Mikhail Delyagin said at a news conference this week.

Shortages and rising prices put the government in a precarious spot, with parliamentary elections less than five months away.

Oil exports are the largest source of hard currency for Russia’s anemic budget and rallying global oil prices mean a welcome injection of tax revenues. But the government is also keen to avoid public panic over gas prices, which would further alienate impoverished voters.

Prime Minister Sergei Stepashin talked to President Boris Yeltsin about the gasoline situation Thursday and then met with the heads of Russia’s top oil companies. Stepashin agreed not to increase oil export duties, but hinted at other restrictions. Some have suggested stricter export quotas.

Meanwhile, many gas pumps have run dry. Lines snake around stations in the Black Sea resort of Sochi, and the Pacific port of Vladivostok is issuing gasoline ration cards.

Gasoline prices have climbed 50 percent this year in some Russian regions, and government estimates predict another 20 percent rise by the end of the year, said analyst Dmitry Avdeyev at the Moscow-based investment bank United Financial Group.

The most popular gasoline, 92 octane, costs $1.02 a gallon in the Kamchatka peninsula in Russia’s Far East. In Moscow, it is 72 cents a gallon _ up from less than 49 cents a gallon a few months ago.

The prices are low by European standards, but significant in a country where the average income is $66 a month, according to government estimates.

Yet the prices are not high enough to keep Russian producers from exporting to richer consumers. Depending on the region, gasoline exports have risen between 20 percent and 50 percent this year over last year, said Konstantin Reznikov, an analyst with Moscow’s Alfa Bank.

First Deputy Prime Minister Nikolai Aksyonenko said Thursday that illegal gasoline exports are soaring. ``They smuggle it out between customs points. Our borders are too porous,″ the Interfax news agency quoted him as saying.

The world’s largest country has never had a reliable way of guaranteeing gasoline across its far-flung territory. The Soviet-era distribution system was inefficient and produced frequent shortages, but then it collapsed with the 1991 Soviet demise, and nothing has replaced it.

Figures vary wildly about how much gasoline goes where.

Hundreds of oil trading companies have been charged recently with fixing prices or otherwise manipulating the market, according to the Ministry for Anti-Monopoly Policy.

Other factors have also contributed to this summer’s shortages.

Harvesting has begun, and the government is trying to guarantee enough fuel for farm equipment. In addition, summer is vacation season and the only time of year the weather is mild enough for long road trips.

In fact, the official in charge of fuel supplies for the southern farming region of Krasnodar shrugged off the gasoline problem, even though the area has seen some of the worst shortages and highest prices this year.

``There’s a panic every summer,″ because the harvest coincides with the period of peak capacity for Krasnodar’s Black Sea resorts, the official, Nikolai Strekozov, said Thursday.