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August 19, 2003

The prime minister of the Russian Federation, Mikhail Kasiyanov, visits Severstal

During the prime minister's visit, Alexey Mordashov, chairman of the board of directors, said that 'we see various aspects of the Government's policies towards the steel industry, through its support for the domestic industry and its mineral base, the development of export opportunities, taxation and social policies.'

Within the opportunities available to the Government to stimulate exports, Alexey Mordashov, drew attention to the acceleration of the processes by which the Russian economy will be given 'market status' by Latin American counties.  During the coming year this region (in particular Columbia, Mexico and Peru) will review the results of important anti-dumping investigations, the outcome of which will be more favourable to Russian steel exporters if 'market status' has been awarded.

Additionally, Alexey Mordashov considers the Government's response towards the candidature of the Baltic other countries for membership of the European Union to be important.  In particular the question of export quotas needs to be examined.  Russian rolled steel exports to these candidate countries in 2002 was about 500,000 tonnes, where as the total quota for exports to the European Union is 1.2 million tonnes.

The metallurgical industry is highly capital intensive, with long periods of time necessary for the realization of investment projects.  This requires Government polices that stimulate investment principally through modernization of the taxation system to support the development of production.  Additionally, Alexey Mordashov, believes that tax and social policies can be integrated: "Many metallurgical companies have social activities that can only be loss making, it is just that these losses should be offset against taxable profits".

Another suggestion made by Alexey Mordashov to help develop social activities is to increase the limit for voluntary medial insurance to 10% of gross salaries.  The current 3% limit does not permit sufficient money to be invested in programmes to fully modernize and perfect employee's health services.

19 August 2003



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