Page 14 - FSUOGM Week 27 2019

FSUOGM POLICY FSUOGM
Russia to subsidise jet fuel to halt rising air fares
RUSSIA
Russia has employed similar subsidies for other petroleum fuels.
RUSSIA intends to start subsidising jet fuel sup- plies to help contain the recent rise in air ticket prices.
Finance Minister Anton Siluanov told Interfax on July 3 that his department had drawn up plans for the support scheme after being instructed to do so by Russian President Vladimir Putin on live television in late June.
Under the scheme, when jet fuel prices on the international market rise above RUB48,300 ($757) per tonne, the government will compen- sate airlines 75% of the di erence using revenues generated from the oil and gas industry. A sim- ilar mechanism is used to subsidise the cost of other fuels such as diesel and gasoline.
e export price of aviation kerosene cur- rently stands at RUB42,330 ($664) and has not risen above RUB48,300 this year, according to the St Petersburg International Mercantile Exchange (SPIMEX), suggesting that the min- istry’s plan may have to be reworked.
Speaking at his annual televised phone-in session on June 20, Putin said that 30% of the price of a flight with Aeroflot, Russia’s main international air carrier, related to fuel costs. A growth in fuel costs by a third last year had led to a 9.5% increase in air fares, he said.
Russia produced 12.7mn tonnes of jet fuel last year, with 10.8mn tonnes being used domesti- cally and the rest being exported. e domestic cost of kerosene and other re ned oil products has spiked over the past year as a result of tax reforms. Under Moscow’s so-called tax manoeu- vre, export duties on crude oil and fuels are to be gradually phased out by 2024 and replaced with increased mineral extraction tax (MET), which is levied on oil producers. By incentivis- ing exports, this is driving up domestic prices for these products whilst also putting pressure on smaller independent fuel retail and re ning players.
Neste’s exit
In related news, Finland’s Neste agreed on July 5 to sell its fuel business in Russia, consisting of 675 lling stations and a loading terminal in St Petersburg, to Tatne , a vertically integrated oil company based in Tatarstan. e two sides have not disclosed the sales price, but have said they aim to close the deal by the end of this year. Tatne is already the fourth largest fuel retailer after Rosneft, Lukoil and Gazprom Ne , operating more than 600 lling stations nationwide.™
Swedish court rejects Vilnius’ appeal
LITHUANIA
Lithuania has been in a dispute with Gazprom for eight years.
A court in Sweden has rejected an appeal by Lithuania against a 2016 arbitration ruling in favour of Russia’s Gazprom, drawing a line under an eight-year legal dispute.
According to Gazprom, the Svea Court of Appeal has upheld an earlier verdict by a Stock- holm arbitration tribunal that dismissed Lithu- ania’s €1.5bn ($1.7bn) claim against the Russian gas supplier over alleged unfair pricing policies.
“Today, the Court of Appeal rejected in full the Lithuanian petition to cancel the decision of the Stockholm arbitration court of June 22, 2016, regarding the dispute between Lithuania and Gazprom,” the rm said in a statement. “ ere- fore the conclusions of the Stockholm arbitration court, which rejected all the claims by Lithuania regarding the conditions for the purchase of Rus- sian gas, were con rmed.”
Lithuania filed a suit against Gazprom in 2011, claiming it had been overcharged for gas supplies since 2004. According to Vilnius, Russia initially o ered its gas at a “fair” price but then altered its pricing formula several times result- ing in a dramatic rise in gas rates for consumers.
e Stockholm court said this argument was not su cient grounds for a claim, however, on the basis that a “fair” price was too “abstract” a term to calculate compensation.
“Lithuanian taxpayers, in addition to nanc- ing the costly Lithuanian disputes, will also have to pay court costs incurred by Gazprom,” the Russian company added.
Lithuania’s energy ministry has said it is “ana- lysing the court’s ruling and its motives.”
“And only after getting acquainted with the arguments and motives will we be able to decide whether any processes are possible,” it told the Baltic News Service (BNS) on June 5. “Despite Gazprom’s active resistance, Lithuania has managed to liberalise its natural gas market and ensure favourable supply conditions for consumers.”
Gazprom was forced to relinquish its control over Lithuania’s national gas grid operator in June 2014 under EU unbundling requirements. Later that year the Baltic state diversi ed its gas supplies with the launch of a 4bn cubic metre per year LNG import terminal in Klaipeda.™
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w w w . N E W S B A S E . c o m Week 27 09•July•2019