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chiefly because its Novoportovskoye oilfield in the Arctic was to be stripped of its current MET breaks. Tatneft, which enjoys support at its highly viscous fields in Tatarstan, was to take a 20% hit to EBITDA, whereas Lukoil was to lose out on 8%, according to VTBC. Lukoil also produces a significant amount of highly viscous crude.
However, during the third reading of the bill, Gazprom Neft and Tatneft were provided with extra support to shore up their earnings. Oilfields in Tatarstan, where Tatneft is by far the largest producer, will receive MET relief of up to RUB1bn per month when oil prices are above the budget assumption. The exact size of the breaks will also be determined by producers’ investments in projects. The total value of these tax breaks is capped at RUB36bn.
Fields entirely located in the Yamal area of the Yamal-Nenets region will get similar breaks, benefiting Gazprom Neft’s Novoportovskoye field. But the company will have to conclude an agreement with the MinFin to obtain this relief, committing to certain levels of investment and production in 2021 up to the end of 2023. The total amount of relief is likewise capped at RUB35bn.
While these adjustments lessen the pain of the reforms, the earnings of Tatneft and Gazprom Neft will still be significantly lower. VTBC estimates that Tatneft will lose $395mn in 2021 because of the removal of high-viscosity tax breaks, but gain only $164mn from the MET relief at Tatarstan fields. Gazprom Neft will lose $1.3bn in 2021 as a result of the changes to the EPT regime, but gain only $164mn from the relief granted to its Yamal fields.
2.4 EU sanctions struggling to keep up with events in Belarus and Russia
The EU has toughened its sanctions on Belarus by adding Belarus' President Alexander Lukashenko’s name on October 13 to the list of top officials facing travel bans and asset freezes.
The possibility of the demonstrations in Minsk ending in deaths after Lukashenko’s Ministry of the Interior released a statement saying it was authorising its forces to use live ammunition against demonstrators a day earlier has thrown into stark relief the EU’s helplessness to do anything to head off violence and broker a peaceful resolution to the stand-off between the state and the population.
The EU upgraded sanctions on October 13, which were originally announced ten days earlier against 40 senior officials, to include Lukashenko’s name, who was not on the original list. It also removed the phrase “unless the situation improves.” However, with little trade, investment or aid programmes, Brussels has almost no real leverage over Minsk. Unlike their Russian and Ukrainian peers, Belarus’ elite have eschewed buying villas on the Riviera or townhouses in Chelsea and have few assets inside the EU that can be frozen or seized, making them impervious to EU retribution.
11 RUSSIA Country Report November 2020 www.intellinews.com
