Senators approve protocol on Kazakh oil in exchange for Russian petroleum products
ST. PETERSBURG. June 26 (Interfax) - The Russian Federation Council has approved a protocol on changes to a Russian-Kazakh intergovernmental agreement on trade and economic cooperation regarding the organization of counter oil supplies from Kazakhstan in exchange for Russian petroleum product deliveries to Kazakhstan.
Kazakhstan is an oil exporter, but it procures duty-free oil from Russia to produce its own petroleum products. Oil refining within Kazakhstan is not sufficient to saturate the domestic market, forcing it to buy not just duty-free oil, but also duty-free fuel from Russia, at a volume of around 2 million tonnes. This causes a revenue shortfall in the Russian budget worth more than half a billion dollars a year. Meanwhile, Russia is interested in light oil from Kazakhstan to reduce the rates of growth in sulfur content in Russian oil.
The changes to the intergovernmental agreement are aimed at compensating for the federal budget revenue shortfalls that are caused by duty-free petroleum product supplies from Russia to Kazakhstan. According to the financial and economic justification attached to the document, revenue shortfalls to the Russian budget were estimated at $600 million in 2012 alone.
At the same time, the senators approved a method to organize counter supplies of Kazakh oil in exchange for Russian petroleum products. These supplies will be paid for on the basis of reconciliation acts compiled on a quarterly basis and adjusted on the basis of a final reconciliation act signed for the year. The method also contains a formula to determine the price of the oil supplied.
