19 Sep 2023 10:02

Russian govt discussing various systemic measures to resolve situation on fuel market - Dep FM

MOSCOW. Sept 19 (Interfax) - The Russian government is discussing various measures to resolve the situation on the fuel market, where prices have risen to record highs recently, Deputy Finance Minister Alexei Sazanov said.

"Various measures are being discussed, the final decision is up to the government," Sazanov told reporters when asked whether the government is discussing the introduction of a prohibitive export duty on oil products.

"The Finance Ministry is not proposing anything, discussion is underway within the government. There are various options, absolutely different," he added.

Commenting on the time period for which a decision will be made, Sazanov said he does not know whether it will be for a certain term or indefinite, "but in any case it must be systemic, so as to regulate the domestic market."

He did not comment on whether the government is discussing reversing its decision to slash the fuel damper subsidy by half as of September, remarking that "various options are being discussed."

President Vladimir Putin, commenting on high fuel prices, said last week the fuel damper was "cut in half and it no longer works as effectively as it worked before," but that oil product producers and the government had agreed on how they will act on the fuel market in order to stabilize the situation.

Interfax sources reported earlier that, at a meeting Deputy Prime Minister Alexander Novak held with oil companies at the end of last week, the finance and energy ministries proposed to introduce a prohibitive export duty of $250 per tonne on oil products, but to reimburse it for companies that ensure the necessary amount of supplies to the domestic market and sales on the exchange.

The imposition of a ban on oil product exports was also discussed, but this proposal was categorically opposed by oil companies, the sources said.

The ministries proposed an export duty of $250 per tonne on both light and dark oil products, the sources said. If a company meets the Energy Ministry quota for oil product supplies to the domestic market and the exchange, the paid duty will be reimbursed to it in the form of the reverse excise on oil.

Such a high duty is being proposed as a measure to prevent "grey exports" of oil products, one of the sources said.

The current export duty will be $7.10 per tonne on light oil products and $23.90 per tonne on dark products in October, and export duties on crude oil and oil products are supposed to drop to zero as of January 1, 2024 under the "tax maneuver."

Since January 1, 2023, an additional charge of 20,000 rubles per tonne on top of the export duty has been charged on gasoline and diesel fuel exports if the exporter is not the producer of the commodity. However, the Energy Ministry has acknowledged that this measure has been ineffective in terms of ensuring that the needs of the domestic market are met.

The ministry earlier proposed to introduce a list of special exporters of oil products to address this problem and Novak supported this proposal. The relevant order is being reviewed by the Kremlin administration's legal department, Interfax sources said.

Exchange prices for gasoline and diesel in Russia have been high for some time, although the country produces a sufficient amount of gasoline and far more diesel than it consumes. An imbalance formed in trading on the St. Petersburg International Mercantile Exchange (SPIMEX) amid the seasonal increase in demand for oil products. Retail prices also began to climb and prices at the pump have recently been rising faster than inflation. Furthermore, farmers began to complain of shortages and high wholesale prices for diesel.

Given all this, the government and oil companies are discussing measures to stabilize the fuel market, one of which is an order to stop "grey" fuel exports.

Analysts said oil product prices in Russia are rising because of the 50% cut to fuel damper payments in September, refinery maintenance and a lucrative export alternative.