Page 7 - RusRPTJuly18

Russian and foreign business lobbies had said any such law would effectively force firms to choose between doing business with Russia and having dealings with the rest of the world and the legislation is unlikely to be passed.
Last month Putin said any retaliation against Western sanctions must not hurt the Russian economy or partners that do business in Russia.
2.2 MinFin Siluanov tax manoeuvre cuts oil export duties to zero
Russian Finance Minister Anton Siluanov manoeuvres into position with oil tax reform
In an early policy win for Finance Minister Anton Siluanov, Russia is preparing a major change in how it taxes oil. The second phase of the so-called “tax manoeuvre” will shift the tax burden entirely upstream by increasing the Mineral Extraction Tax (MET) while zeroing out export duties from 2019-2024. This completes a shift to putting the tax burden squarely on upstream that started in the first phase of the manoeuvre, from 2014-17, which saw export duties halved and MET almost double.
The tax manoeuvre is closely associated with Siluanov. Alongside his promotion to First Deputy Prime Minister in the post-election reshuffle , the policy’s well-publicised approval is a sign that his star is in the ascendant.
For purchasers of Russian oil exports the manoeuvre should be cost-neutral, at least at first. The impact will be largely felt by refineries, in the form of higher gate prices, which the government expects will encourage investments to improve efficiency and value-add. Over time, the quality of Russian refined oil products entering the European market should improve.
Lower tax with broader base
The below graph illustrates how the tax split on each barrel of oil will change as the manoeuvre is completed, both in terms of the marginal and effective rates of MET and export duties. The model assumes an average Urals crude price of $60 per barrel, and a $/RUB exchange rate of 62.
A key benefit of shifting the tax burden entirely to the point of production is that it ensures a greater number of barrels overall are taxed. In total, the Finance Ministry expects that over the six-year implementation of the manoeuvre the
RUSSIA Country Report July 2018 www.intellinews.com