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. Last Updated: 07/27/2016

Shafranik Seeks Oil Payments

Fuel and Energy Minister Yury Shafranik urged the government on Friday to help end a financial crisis on fuel that threatens to bring the economy to its knees.


Shafranik said the failure of customers in Russia and other former Soviet republics to pay for fuel had led for the first time to "artificial" cuts in oil output.


Oil workers are threatening to strike because they have not been paid for months.


"We must establish mechanisms to force consumers to pay for fuel," Shafranik told a meeting attended by First Deputy Prime Minister Oleg Soskovets and industry bosses.


Russian oil production, the second biggest in the world, is officially forecast at 327 million tons (6.54 million barrels per day) this year, down from 354 million (7.08 million bpd) in 1993.


Shafranik said unpaid fuel debts totaled 12 trillion rubles ($7.6 billion bpd) and called for personal support from Soskovets.


"We are relying on you to use your authority to help us," he said. But it was not clear what steps might be taken to make cash available for investment and to pay salaries.


"Consumers are either paying for fuel as their lowest priority or not at all," he said. "They assume, not without justification, that no one will allow their supplies to be cut off."


Shafranik denied that fuel price rises were responsible for inflation, which averaged about 20 percent a month last year, and called for prices to be brought up gradually toward world market levels to stimulate output.


"If we increase energy supplies to the market, this will help to restrain inflation," he said.


The minister said Russia still had a surplus of supply over demand and called for an increase in export quotas.


"We understand the need to satisfy the needs of Russian consumers first and foremost but there must be more export quotas for oil that is not required by Russian consumers," he said.


Economics Minister Alexander Shokhin made a similar comment earlier this week.


The government maintains strict control over oil exports through a system of quotas and licenses that some traders see as a major bureaucratic obstacle.


Shafranik believes greater rights to export to Western markets could help producers escape domestic financial chaos.


He said Russian refineries were working well below their annual capacity of 300 million tons (6 million bpd).


Last year, 224 million tons (4.48 million bpd) of crude was delivered to refineries, 13 percent less than in 1992.