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. Last Updated: 07/27/2016

Cabinet Approves Auto Industry Plan

Itar-TassVladivostok drivers of cars with right-hand steering protesting a possible ban on their vehicles on Thursday.
The Cabinet on Thursday signed off on a road map that sketches out the strategy for the country's automotive industry through 2008.

Industry and Energy Minister Viktor Khristenko said the plan would bring Russia into line with import and safety standards used around the world.

Khristenko's ministry also sought to defuse public anger that the government would ban vehicles with right-hand steering, popular with drivers of second-hand Japanese cars, especially in the Far East.

Khristenko said that as Russia prepares to join the World Trade Organization, it should shift away from protective tariffs on foreign cars, instead tightening emission standards.

Khristenko, who has sought to shield domestic automakers from global competition, appeared to have turned a corner.

Khristenko said he saw no difference between Russian and foreign automakers who assemble their cars in Russia.

"All of them will be Russian residents and all of them ... will enjoy absolutely equal conditions," he said.

Following a change in tariffs last month, foreign carmakers are lining up to assemble models in Russia. Their arrival will help boost the auto industry's share of gross domestic product to 4.3 percent by 2010 from today's 2.5 percent, Khristenko said in the Cabinet meeting, RIA-Novosti reported.

Khristenko said he would welcome a move by a foreign giant to buy a Russian carmaker and turn it around, citing the example of Volkswagen's transformation of moribund Czech Skoda into a competitive manufacturer.

At the same time, Khristenko said the government would return to the issue of protective tariffs on secondhand cars in July but reassured reporters the changes would "not be critical." An additional measure, he said, would be progressively steeper emissions standards, that would match current European Union standards by 2010.

Last week the minister said he was seeking to impose protective import tariffs on used foreign cars more than five years old to prevent such vehicles from turning the country into "the world's car junkyard." To help domestic automakers, Russia in 2002 introduced protective tariffs on secondhand foreign cars more than seven years old.

After the Cabinet meeting, the ministry sought to disperse reports that it was pushing a ban of cars with steering wheels on the right-hand side.

On Thursday, thousands of drivers of used Japanese cars protested across the Far East and Siberia, honking their horns and tying orange ribbons to their antennas. A couple hundred drivers protested across from the White House during the Cabinet meeting.

"We are not against the right-hand steering wheels," Andrei Deineko, the head of the ministry's industry department, said in a statement. "We are for safe right-hand driving."

Among other factors, the authorities blame high traffic deaths on cars with steering wheels on the right side, and part of Khristenko's plan aims to improve road safety.

Vadim Shvetsov, general director of Severstal-Avto, said the government should take further steps to attract foreign investments into the country.

But in a statement, he said the ministry's imposition of protective tariffs on second-hand vehicles would "redirect demand in favor of the new cars and accordingly create additional opportunities to build up capacities for car production within the country."

Viktor Tskhovrebov, an automotive analyst with Renaissance Capital, criticized the part of the plan that increases emission standards as coming too late. "I want to breathe clean air now," he said.