Page 10 - RusRPTAug23

“These sit in our heads like something inevitable, but now nothing is immutable. We need to look at all this again.” Presidential economic aide Maxim Oreshkin agreed that, in the coming months, the government should determine which industries can do without state assistance. Oreshkin said the Economic Development Ministry and the Finance Ministry should draw up a list of “inefficient and excessive expenditure that does not help to transform the economy.” If the war continues, the government will keep offering money to the regions to pay financial benefits to men who have signed-up to fight in Ukraine. But, as war weariness increases, these payments will have to be indexed. Some regions are already finding it hard to cope with this financial burden and have cut offered these benefits.
In the past, the Finance Ministry has coped well with spending cuts. For example, during the pandemic, officials saved almost one trillion rubles — partly by reducing military expenditure. But, since then, spending has increased by almost a third to 29 trillion rubles. Social handouts, as well as military spending, fall into the category of “protected” expenditure and cannot be reduced. However, indexing them can save some money.
Additional funds can only come from tax increases. In 2017, the government undertook not to increase taxes for six years and has largely kept its word: key tax rates (on income, VAT and revenue) are unchanged. However, in 2024, after the presidential election, there is a six-year “window” for new increases — and the Finance Ministry has not ruled out rises. The elections themselves are an important factor for those devising the budget as a war-weary public will need to be offered financial incentives to vote for Putin.
One-off payments to the state from commodity companies are another possible source of income. Last year, state-owned gas giant Gazprom made a one-off mineral extraction tax payment of 1.2 trillion rubles, ensuring that the budget deficit remained within reasonable limits. This year, it’s the oil sector’s turn: the Finance Ministry plans to halve damper subsidies, postpone the introduction of tax deductions on depleted fields for three years and reduce Urals’ discount to Brent when calculating taxes. However, this all means that the tax burden on the oil industry is now close to its limit.
Oil-and-gas revenues are down from last year’s record levels, but remain close to what was raised in 2021. The big risk here for Russia lies in Western sanctions: there is talk about lowering the price cap on Russian oil in some European capitals, as well as imposing further restrictions on logistics and purchases. If these measures are implemented, they will have serious consequences for Russia’s finances.
2.1 Prigozhin sells his media assets
Yevgeny Prigozhin, the founder of the Wagner Group, is facing significant setbacks after his failed mutiny and is now hastily disposing of his assets, including the Patriot media group, which includes the infamous Internet Research Agency, commonly referred to as a "troll factory." Prigozhin owns several news outlets under Patriot's umbrella, with the RIA Federal News Agency (FAN) being the largest. However, all publications
10 RUSSIA Country Report August 2023 www.intellinews.com