Page 18 - RusRPTNov19

Before the clear structure of Vostok Oil and final parameters of the tax breaks are determined, Sberbank finds it hard to estimate the extent of the gains, but believes that the main beneficiary would be NNK's Payakha field.
Other proposed tax breaks as part of the Arctic package include subsidies for offshore Arctic oil and gas fields, which might receive a discounted MET rate (5% for the first 15 years or until 1% of reserves have been developed), a potential reduction in the regional land and income taxes, as well as a deduction from federal income tax at 50% of the exploration expense.
In addition, the gas MET for LNG and gas chemical projects might be zeroed out for 12 years. "The beneficiaries are likely to include the gas chemical projects of Gazprom Neft and Lukoil, as well as Novatek's future LNG project," Sberbank notes, suggesting that current tax holidays for Yamal LNG and Arctic LNG-2 of Novatek are likely to remain in place for future projects.
"The majority of LNG development licenses are owned by Novatek, but in addition, two gas chemical projects announced by Gazprom Neft and Lukoil may receive a preferential tax regime," BCS GM also wrote.
2.10 Russian sanctions on EU food cost consumer $7bn a year
Russia’s sanctions on the import of food products from the European Union (EU) is costing the Russians consumer RUB445bn ($7bn) a year, or about $50 a year per head, according to a study by economists at RANEPA and CEFIR, Kommersant reported on October 29.
And the cost is mainly bourn by consumers that account for 84% the increased costs while the food industry manufactures carries only 3% of the extra burden, the study found. Food importers carry another 13% of the burden in net losses.
Russia imposed the agri-sanctions on Europe as a tit-for-tat measure after Europe and Amercia slapped punitive sanctions on Russia following its annexation of the Crimea in May 2014.
Since then president Vladimir Putin has said the Russian sanctions on food cost Europe €100bn a year, although it is not clear where he gets this figure from. However, mutual trade between Russia and the EU has fallen by about that amount in the last five years and many EU food exporters have been badly wounded by the Russian sanctions. Previously Russia was a major export market for things like pork and fruit. High end processed food products like Italian cured meats and posh French cheese have almost entirely disappeared from Moscow shop shelves since the ban was introduced.
Russian food manufacturers have scrambled to replace the missing products, but with little success, except for products like tomatoes, pork and poultry, reports Kommersant. In these cases the prices of good initially rose dramatically, however, since last year the volumes being produced domestically have reached a point where the prices have fallen below pre-sanction levels.
The total benefits of consumers from the import substitution of pork, poultry and tomatoes is estimated by the authors of the study at RUB75bn a year, but is no way near enough to offset the rise in prices on other goods. Most of the items on the list of sanctioned goods have not been replaced.
Amongst Russia’s friends that have stepped into the breach and increase food exports to Russia, Belarus has been the big winner seeing its exports rise by 78% in the period.
18 RUSSIA Country Report November 2019 www.intellinews.o