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. Last Updated: 07/27/2016

Deal to Bring Moscow New Gasoline Stations

Under a unique deal struck between the Moscow city government and Russia's Fuel and Energy Ministry, several leading Russian oil companies will build modern gasoline stations with supermarkets and repair shops in the capital in exchange for land and tax breaks.

As part of the deal, the Energy Ministry, which controls the country's oil supply, also agreed to give MOSCOW priority in receiving oil supplies, First Deputy Fuel and Energy Minister Vladimir Kostyunin said in an interview Friday.

Under the agreement, the Russian oil joint stock company Lukoil will build a chain of 50 Western-style gasoline stations, worth $1. 5 million each, Kostyunin said.

"It is time to introduce to our people nice, Western-style multipurpose stations where they can fill up the car, get it washed, repair it and pick up some food of get some coffee at the same time", he said.

A city and federal government policy of maintaining cheaper gasoline prices in Moscow as compared to the rest of the country has been blamed recently for the supply delays as Russian refineries were reluctant to sell gasoline to Moscow cheaply. But higher gasoline prices - which were raised again Thursday from 75 to 100 rubles per liter for A-92 - have failed to rid the city of lines, a sign that part of the problem is a result of the dearth of stations. The ministry estimates the city lacks about 200 stations.

Kostyunin said that the state oil company Rosneft and the joint-stock oil companies Yukas and Surgutneftegaz will likely join Lukoil in the future. All four companies will provide supplies of gasoline and other oil products to the capital.

The spokesman for Lukoil, Alexander Vasilenko said that his company will gain a sales market in Moscow through the project.

"We produce oil, process it, so we want to complete the cycle and get a sale market", he said.

The oil companies will receive lower taxes on land, transport and sales in exchange for building the stations. The Moscow government will allocate land plots for the gasoline stations and for housing for Fuel and Energy Ministry employees in the Moscow city and region.

Oil companies will finance construction of several supermarkets not connected with the stations and also pay for construction of pharmaceutical factories in the city. The ministry will allocate special oil export quotas to finance the factorie's production, Kostyunin said.

Vasilenko of Lukoil said the project has been delayed for almost two years because of the slow bureaucracy at the local government level.

But he said the recent approval of the deal, by Moscow Mayor Yuri Luzhkov and the Fuel and Energy Minister Yury Shafranik, will protect it from further delays.

"We would have done it a long time ago, but we faced an opposition from the Moscow districts reluctant to give their land away", said Kostyunin.

Lukoil has already bought Italian-made equipment for five stations, Vasilenko said. The company has already built several modern stations in Tyumen, he said, adding, "they look just like Western ones.

He said it will not take more that six months to build stations once the land is allocated.

Kostyunin said that the amount of investment in the project had not been finalized, but that it would be jointly financed by the Fuel and Energy Ministry, the oil companies and the Moscow government.