The Russian government will have to revise the methodology for setting prices for oil and oil products when calculating taxes for companies in the energy sector.
So ordered the President of the country Vladimir Putin.
The Head of State instructed the Cabinet of Ministers to prepare proposals for possible adjustments by March 1, 2023.
As explained in the Kremlin, the initiative is designed to minimize the negative impact on federal budget revenues, taking into account the peculiarities of the formation of the cost of raw materials in the context of sanctions.
Recall that in 2022, after the start of a special military operation in Ukraine, Western countries introduced a number of economic restrictions against Moscow and began to refuse to purchase Russian oil one by one.
Moreover, since December 5, the European Union, the G7 states and Australia have banned their companies from insuring and transporting raw materials from Russia to other regions of the world at a price higher than $60 per barrel.
In response to the actions of the West, Russia decided to completely cut off the supply of energy to those importers who would join the price restrictions.
Under the circumstances, Moscow is actively redirecting oil exports to friendly countries in Asia, Africa and Latin America, but is forced to provide discounts to attract buyers.
“The main problem is the high discount as a result of the high level of freight costs (oil transportation fees. -
That is, the cost of freight has grown quite strongly due to the risks that carriers and counterparties experience regarding possible sanctions in accordance with the fact that they do not set a price ceiling,” Russian Deputy Prime Minister Alexander Novak explained earlier at a meeting with Vladimir Putin.
© Vitaliy Timkiv
According to the latest estimates of the Ministry of Finance of the Russian Federation, from December 15, 2022 to January 14, 2023, a barrel of Russian Urals oil was sold at an average of $46.82.
At the same time, the cost of raw materials of the benchmark grade Brent on the world market fluctuated in the range of $77-87 per barrel, and now it is about $88.5.
Note that the Russian budget for 2023 includes the price of Urals at $70.1 per barrel.
As calculated in the Ministry of Finance, taking into account the current quotes in January, the state treasury may miss about 54.5 billion rubles.
Against this background, Vladimir Putin asked the government to deal with the situation so that the discounts provided by Moscow "do not create any problems with the budget."
Experts believe that changes in the system of taxation of the oil business will partly help solve the problem set by the president.
“The Ministry of Finance sets the export duty and mineral extraction tax based on the average oil price.
That is, the more expensive the raw material, the more money goes to the budget.
However, the price of oil itself depends on the grade and place where it is produced.
So, for example, Far Eastern oil costs more than other varieties, including Urals, ”Igor Yushkov, a leading analyst at the National Energy Security Fund, told RT.
According to him, today the information on the average cost of oil is provided to the Ministry of Finance by the international analytical agency Argus.
The company makes its calculations based on a survey of traders, at what approximate price do they buy raw materials from Russia.
Meanwhile, the collected data relate only to sales in the European market, which has now lost its relevance for Moscow, Yushkov said.
Since Russia no longer trades oil with the EU, the Argus statistics are no longer representative.
The real cost of oil sold may be higher than the official $46.82 per barrel.
This means that the state earns less from taxes than it should, experts say.
“Due to the restructuring of exports and the redistribution of the sales margin to transportation costs, Argus quotes are not representative and do not reflect the real income of oil workers.
Therefore, the Russian authorities today need new guidelines.
Perhaps these will be Asian benchmarks, ”Igor Galaktionov, an expert on the stock market at BCS World of Investments, suggested in a conversation with RT.
It's a question of time
Along with changes in the calculation of taxes, Russia may limit the rebates themselves on their oil.
Thus, the Ministry of Energy of the country plans to monitor the dynamics of prices for raw materials and, if necessary, set a maximum discount based on market quotations.
The department is going to present the details of the operation of such a mechanism in the near future.
However, discounts on Russian oil should be reduced soon anyway, Alexander Novak is sure.
In his opinion, the current state of affairs with prices is only temporary.
“The discount should decrease over time, as we observed during 2022, when in March-April the discount grew a lot, then it began to gradually fall and halved,” the deputy chairman of the Cabinet noted.
© Andrey Rudakov/Bloomberg
A similar point of view is shared by experts interviewed by RT.
According to Natalya Milchakova, lead analyst at Freedom Finance Global, today's discounts are more related to the marketing of Russian oil to new customers than to the Western price ceiling.
As the specialist explained, the discount allows Moscow not only to get new customers and maintain the loyalty of existing ones, but also to successfully compete with raw material suppliers from OPEC.
So, for example, geographical proximity to China gives Russia the opportunity to dump much more than Saudi Arabia does.
“In a couple of years (and possibly even earlier), Russia will build a new logistics infrastructure, increase the number of tankers, and establish cooperation with Chinese insurance companies instead of European ones.
And most importantly, the western direction will no longer be a priority for Russian hydrocarbon exports.
Therefore, the price of our oil will be much more than the market price, ”the expert suggested.
At the same time, the cost of raw materials in the world will systematically increase in the near future, Milchakova believes.
Thus, at the moment there is already a shortage of energy resources in the global market, while fuel consumption is growing steadily, especially in India and China.
“As for oil and gas revenues to the Russian budget, the situation is not too bad now.
It’s just that in 2023 we will not receive excess profits from the sale of raw materials, and the total volume of oil and gas revenues will return to the level of 2021 or 2020.
However, by 2024-2025, this lost profit will be fully compensated, since Russia will no longer have to dump, and no one has canceled the global oil shortage, ”concluded Natalya Milchakova.