Page 5 - FSUOGM Week 07 2023

FSUOGM COMMENTARY FSUOGM

Russian deputy prime
minister Alexander
Novak.

products anywhere in the world. Western com- continued to trade in the upper $50s. Its historic
panies are barred from providing transport discount to other global benchmarks has wid-
services, financing, technical assistance, insur- ened significantly over the past year as a result
ance or brokering services for any cargoes that of Western sanctions and other fallout from the
are sold above the price caps. The caps are set at war in Ukraine.
$60 per barrel for crude oil, $100 per barrel for Russia is reportedly looking to offset the low
premium oil products such as diesel, kerosene price of Urals to its budget by recalculating its
and gasoline, and $45 per barrel for discounted taxation. The government plans to fix the price
products such as fuel oil and naphtha. of Urals at $20 per barrel below dated Brent for
The latest cut will mark the biggest monthly the purposes of tax, sources told Reuters on
reduction since Russian oil output slumped February 10. Under the current regime, min-
almost 9% last April, after Western sanctions eral extraction tax, additional income tax, oil
were imposed in response to Moscow’s invasion export duty and reverse excise on oil is calculated
of Ukraine. according to Urals price assessments in Europe’s
“Russia believes that the ‘price cap’ mecha- Rotterdam and Augusta ports.
nism in the sale of Russian oil and oil products Rosneft CEO Igor Sechin said earlier his
is an interference in market relations and a con- month that Europe would no longer be used as
tinuation of the destructive energy policy of the the reference price for Urals, as Asia is now the
countries of the collective West,” Novak said. larger buyer following events of the past year. The
average price of Urals was only $49.5 per barrel
Pressure ratchets up in January, according to Russia’s finance min-
Russian oil production averaged 10.7mn bpd istry, down 42% year on year and far below the
last year, up 2% compared with the level in $70.1 per barrel that Moscow has assumed in its
2021, as a reduction in supplies to Western budget planning for this year.
markets was more than offset by increased pur- According to Russian state news agency
chases by Asian buyers – most notably China RIA Novosti, Moscow is also considering a
and India. one-time windfall tax on large corporations
The latest Western measures have created as a stop-gap measure to plug the hole in the
greater difficulty for Russia in finding markets budget. But this would be a “voluntary” con-
for its oil and oil products, however. The sale of tribution, RIA said.
these products is a major source of revenue for Proposals and counter-proposals have been
the state budget, which had a $25bn deficit in tabled so far, another Russian news outlet, The
January. Lower export volumes also caused Rus- Bell, said. Russian Prime Minister Mikhail
sia’s current account surplus to shrink by 58.2% Mishustin had called for members of the Rus-
to $8bn in January, at a time when Moscow is sian Union of Industrialists and Entrepreneurs
having to ramp up spending to pay for its war (RSPP) to make a $2.8bn one-off payment to the
in Ukraine. government. RSPP’s counter-proposal was for
Brent and WTI jumped more than 2% after a 0.5% increase on the existing 20% income tax
Novak announced Russia’s cut in production. rate that companies pay. But the finance minis-
But while Brent rose to settle at $86.39 per bar- try has dismissed that it is considering a hike in
rel that day, Russia’s flagship Urals oil blend income tax. ™

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