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. Last Updated: 07/27/2016

Gref: Lift the Lid on Underground Stash

Russia should use the vast stocks of commodities it keeps in vaults across the country to curb volatility in domestic prices, Economic Development and Trade Minister German Gref said Friday.

Gref said government intervention was necessary to calm domestic prices, particularly in oil products and metals.

"It is obvious that we have to try and use our capabilities for market intervention by the state to smooth the volatility of market prices," Gref said in a meeting with the Federal Reserves Agency, which comes under his ministry's purview.

The agency keeps stocks of a variety of products from canned meat and paper to makeshift shelters, railway bridges and power generators. The exact list of commodities and their volumes, kept at 150 underground facilities across the country, is a state secret. Its annual budget runs to hundreds of millions of dollars, Gref said.

Set up 73 years ago, the agency's stocks have been used to plug shortages after manmade and natural disasters at home and abroad.

In 1986 it supplied more than 3,000 tons of lead to cover the Chernobyl nuclear reactor. Food and makeshift shelters were also sent to the Kuril Islands after an earthquake in 1994, and to Afghanistan in 2003.

Gref said a working group would report to him by the end of March with a plan for how the agency's stocks can be used to smooth over price bumps.

"This function will be in demand given our still inefficient anti-monopoly and tariff regulation," he said.

Sales from the reserves should enable the government to prevent spiraling prices in commodities crucial to industrial development, such as oil products, ferrous metals and chemicals.

Gref said that domestic prices for oil products and metals had recently risen at twice the rate of those commodities abroad.

Gref made his comments a day after he issued a warning that consumer prices this month were rising faster than usual for January.

By Jan. 17, prices had risen by 1.9 percent, Reuters quoted Gref as saying, compared with 1.8 percent over the whole of last January -- equivalent to an annual inflation rate of about 50 percent.

January is traditionally Russia's most inflationary month, as monopoly tariff hikes usually come into force on New Year's Day.

Last fall, the Federal Anti-Monopoly Service said that the government could consider intervening on the domestic oil market this year.

Gref also said that the reserves agency should become more transparent. "There are too many unnecessary secrets, they have to be opened up as much as possible," he said.

Valery Nesterov, an oil analyst with Troika Dialog, said that the government would probably move toward adopting Western practices on publishing the levels of oil reserves.

"The level of stocks could be published on a weekly or a monthly basis," he said.

"The situation with petrol prices is worrying, so the State Duma and the government should consider all possibilities [to control prices]."