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FSUOGM POLICY FSUOGM

Russia closes export duty

loophole for fuel oil

RUSSIA RUSSIA’S Federal Customs Service (FCS) has Novoshakhtinsky and Yaysky plants, and the
announced it will now treat aromatic hydro- Ukhtinsky refinery owned by Lukoil.
Refiners have exploited carbons as fuel oil, meaning they will be subject Fuel oil, known in Russia as mazut, and vac-
the loophole for years to to export duties – a move which is expected to uum gas oil are classified under a customs code
reduce taxes. erode refining margins. beginning with the digits 2710, making them
The FCS is looking to stamp out cases where automatically subject to export duty. However,
refiners have been using a loophole in customs fuel oil containing more than 50% aromatic
rules to count fuel oil as aromatic hydrocarbons, hydrocarbons has a code starting with 2707,
a class of unsaturated hydrocarbons based on exempting it from the tax.
the six-carbon benzene ring. Fuel oil is subject The new regulation by FCS came into force
to the same export duty as crude oil, but aromatic on September 14 and applies the 2710 code to
hydrocarbons are exempt from the tax. fuel oil that is over half aromatic hydrocarbons
Russia’s government has been gradually as well.
increasing duty on dark oil products such as “This change could potentially worsen the
fuel oil and vacuum gasoil in recent years. Its economics of less complex refineries,” analysts at
aim has been to encourage refiners to sell less of VTB Capital (VTBC) wrote in a research note on
these and invest in modernising their plants to September 14. “We believe it will be particularly
produce more deeply refined light oil products felt by smaller and independent refineries, rather
instead, such as motor fuels, which are more than those belonging to vertically integrated oil
valuable. companies.”
However, low oil prices since 2014 have led to Small independent plants accounted for 16%
many refiners postponing planned modernisa- of total refining throughput in Russia in the first
tions. Plant owners have exploited the loophole eight months of this year, the bank estimates.
in legislation for years to avoid tax without hav- Affected refiners may try and look for alter-
ing to upgrade their plants. native ways of categorising their dark fuels to
According to Reuters, some 12.4mn tonnes avoid paying tax, Russia’s Kommersant newspa-
of petroleum products were exported under per reported on September 14. For instance, fuel
the duty-free scheme last year. It is used by a oil that is exported for the purpose of bunkering
dozen refineries, including the independent ships is not subject to duty. ™

P16 www. NEWSBASE .com Week 37 16•September•2020