Russia Exporter-Tax Anxiety Spurs Worst Run for Stocks in Year

  • Uralkali, United Co. Rusal lead retreat on Micex Index
  • Government proposals so far only target oil industry

Russian stocks headed for their longest streak of losses in more than a year as the nation’s biggest oil and mining companies fell on concern they may be targeted in a government drive to extract more taxes to cover a budget shortfall.

Uralkali PJSC, Russia’s largest potash company, fell 2.8 percent, contributing to the benchmark Micex Index’s 0.8 percent drop. The gauge has lost almost 7 percent in the last six days, trimming its advance this year to 16 percent. The ruble traded little changed against the dollar at 66.3860 by 5:02 p.m. in Moscow.

The ruble’s 50 percent devaluation against the dollar since the start of 2014 has boosted exporters’ foreign-currency earnings and Finance Minister Anton Siluanov on Wednesday said it’s time for the government to take a share of the windfall. While the ministry has proposed boosting the tax on oil companies to bring in more than 600 billion rubles ($9.1 billion) of additional revenue next year, it’s still unclear whether other industries will be targeted.

"The problem is that there’s still no decision who will be affected and by how much,” said Alexander Losev, chief executive officer at Sputnik Asset Management in Moscow, who cut his holdings of Russian stocks because of the lack of clarity. “They may be oversold now, but I’d rather not be spitting into the wind.”

Letter of Complaint

Tax changes should be executed with care to avoid harming the nation’s industries, Deputy Prime Minister Arkady Dvorkovich said on Thursday. The government isn’t targeting metals and natural gas, while the Finance Ministry’s oil-tax proposal is “impossible,” he said. “It will have severe consequences for the industry. Calculations are still being done.”

Oil and gas companies account for more than half of the stocks in Russian indexes, while exporters as a group amount to more than 65 percent, Sputnik’s Losev said. Aluminum producer United Co. Rusal lost 1.5 percent, set for a 10 percent tumble in the past five days.

The chief executive officers of Russia’s biggest oil producers, including Rosneft OJSC, Lukoil PJSC and Surgutneftegas OJSC, prepared a letter to President Vladimir Putin challenging the Finance Ministry’s proposal to increase the tax next year, according to two oil company officials, who asked not to be identified because the information isn’t public.

Rosneft, Russia’s largest oil company, fell 0.4 percent to 235.85 rubles, the lowest in a month and the fourth day of declines. Brent crude climbed 1.3 percent to $48.35 a barrel.

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