Russia Reconsiders Tax Proposals to Ease Oil Producer Fears

  • Russia won't change oil extraction tax: Medvedev spokeswoman
  • Government discussion shifts to export duty on natural gas

Russia will weigh lowering oil-export duties at a slower rate than planned instead of raising an extraction tax as the government seeks to plug its budget deficit without hurting the prospects for the country’s biggest crude producers.

“The government is considering the variant where the export duty is reduced more slowly,” Natalya Timakova, a spokeswoman for Prime Minister Dmitry Medvedev, told reporters on Monday at his residence outside Moscow. Medvedev decided that Russia won’t make changes to an oil-extraction tax, she said.

Finance Ministry plans to raise more than 600 billion rubles ($9.1 billion) of additional tax revenue next year prompted concerns that a higher extraction levy would curb Russian oil production. The collapse in crude prices sees Russia facing its widest budget gap this year since 2010, forcing the government to choose between deeper austerity, tax increases and a freeze on pension-fund contributions.

The government had originally planned to lower the export duty on oil to 36 percent next year from 42 percent, Economy Minister Alexei Ulyukayev told reporters. Each percentage point decrease is worth about 37 billion rubles to Russian producers, he said, citing the companies’ accounting.

“In essence, the proposal is not to do this decrease in full,” according to Ulyukayev, who said Russia is also considering other sources of budget revenue, including export duties on natural gas and central bank earnings. “We have sources that aren’t linked to actions in energy, including, for example, central bank profits.”

The Russian government’s additional take from the oil industry could be about 200 billion rubles via export duties in 2016, Interfax said, citing unidentified people in the Russian government. The state may also seek an additional 100 billion rubles in 2016 from an extraction tax on natural gas, Interfax said citing unidentified government officials.

Gazprom PJSC, Russia’s largest natural gas producer, fell 2.2 percent in Moscow, while the nation’s biggest oil producers pared earlier losses.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE