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. Last Updated: 07/27/2016

Premier May Lift Import Tariffs

Prime Minister Viktor Chernomyrdin, bowing to pressure from the mayors of Russia's top cities, will reconsider the government's recent controversial law imposing import tariffs on food and sharply raising duties on other goods, a Kremlin spokesman said Wednesday.


Chernomyrdin's acknowledgment of the unpopularity of the move, which critics said would jump start inflation, followed a request by President Boris Yeltsin for "corrections" in the law.


"The government should either give more detailed and sensible reasons to justify the decision or correct it," said Alexander Orfyonov, deputy head of Yeltsin's press service.


Chernomyrdin's apparent decision to back down followed a meeting Tuesday evening with the U.S. commerce secretary, Ron Brown, who is in Russia on a five-day mission to help ease obstacles -- like tariffs and taxes -- facing foreign investors here.


Speaking after that meeting, Chernomyrdin said that the new tariffs would not be levied on products imported by businesses whose projects precede the law, in effect offering a so-called grandfather clause.


"In the case of earlier contracts and agreements, of course, this governmental decision should not apply," Chernomyrdin said.


But he stopped short of promising to completely rescind the tariffs.


"I can only explain once again that we will revise certain things," he said. "We will introduce tariffs for some items and cancel them for others."


The tariffs, which took effect March 15, impose duties of up to 100 percent on imported goods, including a new 15 percent tariff on imported food.


Owners of city food-stores have said they will be forced to pass along to the customer all the additional tax expense, meaning that Moscow's already high prices on imported foods will rise.


Deputy Prime Minister Alexander Zaveryukha, who heads the powerful agriculture lobby, defended the hikes Tuesday, saying that they protect Russian consumers "from low quality and therefore cheap products."


As the top cabinet official for Russia's ailing agrarian sector, Zaveryukha has lobbied hard for the tariffs, which would provide protection for Russian food producers.


The tariff hikes represent the one substantive change to the cabinet's economic policy that conservatives can point to since the resignation in January of leading reformers,.


Though billions of rubles in credits have been promised to support cash-strapped Russian producers by Zaveryukha and First Deputy Prime Minister Oleg Soskovets, Chernomyrdin has so far maintained the tight lending policies of the reformers.


The loss of the import tariff hikes, the new cabinet's sole concession to Russian producers, would likely be a serious setback to the protectionist-minded industrialists and agrarians led by Zaveryukha and Soskovets.


Though Chernomyrdin can ill afford to lose their support, he is facing pressure to rescind the tariffs. Vladimir Shumeiko, speaker of the upper house, has opposed the tariffs together with Yeltsin and the mayors of Moscow, St. Petersburg and Yekaterinburg.


In a joint letter to Yeltsin, the three mayors warned last week that the tariffs would lead to hikes in food price and that "the hardships will fall on the shoulders of those with low incomes, leading to the further impoverishment of the people."


Itar-Tass quoted Yeltsin as saying Tuesday he had discussed the matter with Chernomyrdin and that "they shar-ed the opinion about the need for corrections." It added that they agreed this should be done "without dropping the principle of reasonable protectionism."


Chernomyrdin echoed this Tuesday, saying: "We are getting vast amounts of substandard food. There are tens of hundreds of cases of poisoning. The government will not be a passive onlooker."


Zaveryukha's press secretary said Wednesday that the minister still supported the tariffs. This indicates that attempts to change the law will likely meet strong opposition.


Zaveryukha has said that the duties would be in effect only until Sept. 1, though no mention of this impermanence is made in the law.


Sugar producers, who won a 20 percent tariff on imported sugar in the new law, reacted angrily to the news that the government would take another look at its decision. "We will introduce tariffs for some items and cancel them for others."


The tariffs, which took effect March 15, impose duties of up to 100 percent on imported goods, including a new 15 percent tariff on imported food. Previously imported foods were exempt from import duties.


Owners of city food-stores have said they will be forced to pass along to the customer all the additional tax expense, meaning that Moscow's already high prices on imported foods will rise 15 percent as soon as present inventories are depleted.


Deputy Prime Minister Alexander Zaveryukha, who heads the powerful agriculture lobby, defended the hikes Tuesday, saying that they protect Russian consumers "from low quality and therefore cheap products."


As the top cabinet official for Russia's ailing agrarian sector, Zaveryukha has lobbied hard for the tariffs, which would provide protection for Russian food producers against the flood of imported foodstuffs.


The tariff hikes represent the one substantive change to the cabinet's economic policy that conservatives can point to since the resignation in January of two leading reformers, Economics Minister Yegor Gaidar and Finance Minister Boris Fyodorov.


Though billions of rubles in credits have been promised to support cash-strapped Russian producers by Zaveryukha and First Deputy Prime Minister Oleg Soskovets, Chernomyrdin has so far maintained the tight lending policies of Gaidar and Fyodorov.


The loss of the import tariff hikes, the new cabinet's sole concession to Russian producers, would likely be a serious setback to the protectionist-minded industrialists and agrarians led by Zaveryukha and Soskovets.


Though Chernomyrdin can ill afford to lose their support, he is facing pressure to rescind the tariffs from formidable forces. Vladimir Shumeiko, speaker of the upper house of parliament, has weighed in against the tariffs together with Yeltsin and the mayors of Moscow, St. Petersburg and Yekaterinburg.


In a joint letter to Yeltsin, the three mayors warned last week that the tariffs would lead to hikes in food price and that "the hardships will fall on the shoulders of those with low incomes, leading to the further impoverishment of the people."


On Tuesday, Itar-Tass quoted Yeltsin as saying he had discussed the matter with Chernomyrdin and that "they shared the opinion about the need for corrections." But the agency added that the two agreed this should be done "without dropping the principle of reasonable protectionism."


Chernomyrdin echoed this Tuesday, saying: "We are getting vast amounts of substandard food. There are tens of hundreds of cases of poisoning. The government will not be a passive onlooker."


Zaveryukha's press secretary said Wednesday that the minister still supported the tariffs. This indicates that attempts to change the law will likely meet strong opposition.


Zaveryukha has said that the duties would be in effect only until Sept. 1, though no mention of this impermanence is made in the law.


Sugar producers, who won a 20 percent tariff on imported sugar in the new law, reacted angrily to the news that the government would take another look at its decision."The government spent six months deciding whether or not to introduce the taxes. Now they're going to spend another six months deciding whether or not to scrap them," said a sugar trader quoted by Reuters.


But candy makers, who watched sugar prices rise 20 percent in the last two weeks, have questioned the logic of protecting domestic sugar producers when they are incapable of meeting local demands.