Economy

Protectionism For Russia's Automakers, With "Recycling" Tax On Foreign Imports

Cars on display at the Novosibirsk Railway Museum
Cars on display at the Novosibirsk Railway Museum
Egor Popov

MOSCOW - At the beginning of November, Russian automaker executives testified in front of the Trade and Industry Ministry about a network of sites around the country they had set up to allow car owners to drop off unwanted cars for recycling. It was the first sign in a move towards the creation of a massive car-recycling infrastructure in Russia.

But what is notable is that the network was created in an unprecedentedly short time. In most auto markets in the world, this kind of network takes years to develop. In Russia it happened in a couple of months.

The reason is that in September a large “vehicle recovery tax,” came into effect, which is meant to protect Russian automakers as Russia joins the World Trade Organization (WTO) and cuts import tariffs on foreign cars. Of course, the tax is always explained as being about environmental protection and road safety.

All auto importers pay the tax, which is then used to pay for car recycling. Russian auto manufacturers are exempt from paying as long as they guarantee that they will recycle, meaning that they establish an auto-recycling drop-off center in every territory with more than 500,000 residents.

The recycling tax is paid on a per-car basis, and ranges from a low of around $550 for new cars to $55,000 for used trucks. The fees for used vehicles are higher than for new ones.

A representative from the auto industry who spoke with Kommersant said that it was difficult to set up so many recycling points, especially in areas with few dealerships. According to Georgi Golenev, who leads one of the automakers’ recycling programs, in some parts of the country all of the companies worked together to set up joint recycling stations.

The price of recycling

But getting the old car from its owner - that is just the first step in the recycling process. It is more complicated to break down the car and find uses for all of its parts. “What little car-recycling infrastructure there is right now is only in certain parts of the country. There are only nine companies in Russia that can break down the cars. And our capacity for reusing tires and batteries is ten times less than the expected demand,” Golenev explained.

He also explained that for certain types of car parts, such as glass and plastics, there is practically no recycling capacity at this time. The company he works for says that they will pursue a ‘regionally adapted’ strategy regarding recycling. In the country’s Far East it makes more sense to just compress the old cars, and send them to centralized specialized plants that can recycle plastics, glass, rubbers and other materials.

The actual technical perimeters for car recycling have yet to be established, and they are expected to be finalized by 2015. Golenev says that for the most part, cars for which the recycling tax is being paid now will not actually show up at recycling points for a least five years - until then, it will be older, broken-down cars only.

Cars in Russia, in general, are old. Approximately 22% of the cars are more than 20 years old. Those cars could all potentially be recycled, but there is practically no incentive for car owners to drop old cars off at the recycling point. The Trade and Industry Ministry has been considering changing transport taxes to take into account the age and ecological impact of different cars, but so far they have not adopted any new guidelines.

Recycling has already been shown to be an effective way to support the automobile sector during the crisis, and since the institution of the recycling tax in September, there has been a notable decrease in the number of imported vehicles sold in Russia, especially among trucks. Manufacturers of tractors and construction vehicles have begun pushing for similar recycling taxes to reduce the number of imports on the Russian market. So have railroad car manufacturers.

In the future, the program may even be extended to include airplanes, although there are not yet any concrete plans for plane recycling fees.

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File:Parsin Gas and CNG Station in Karaj-Qazvin Freeway, Iran ...

Gas stations in many Iranian cities had trouble supplying fuel earlier in the week in what was a suspected cyberattack on the fuel distribution system. One Tehran daily on Thursday blamed Israel, which may have carried out similar acts in past years, to weaken Iran's hostile regime.

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Iran International reported that Tehran-based news agency ISNA posted, then deleted, a report on drivers also seeing the message "cyberattack 64411" on screens at gas stations, purported to be the telephone number of the office of Iran's supreme leader, Ayatollah Ali Khamenei.

A member of parliament's National Security Committee, Vahid Jalalzadeh, said the attack had been planned months ahead, and had inflicted "grave losses," Iran International and domestic agencies reported Thursday. The conservative Tehran newspaper Kayhan named "America, the Zionist regime and their goons" as the "chief suspects" in the attack.

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