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. Last Updated: 07/27/2016

Premier Grants 7 More Oil JVs Tax Cuts

Prime Minister Viktor Chernomyrdin has granted export tariff exemptions to seven joint-venture oil companies, bringing the total number of privileged joint ventures to 14, energy officials said Friday.


Chernomyrdin granted one-year exemptions to Tatoilgas, Tatex, Tatoilpetro, Geoilbent, Nobel Oil and Komiquest, and a six-month exemption to Mekamineft on Tuesday, said Tamara Trumilina, deputy head of the economic department of the Fuel and Energy Ministry.


"The decision reflects Russia's interest in foreign investment and technologies in the oil industry," said Mikhail Gaykazov, an export official at the Foreign Trade Ministry. "These companies bring in advanced oil extraction technologies, on which we are far behind the rest of the world."


Chernomyrdin signed the resolution on the same day President Boris Yeltsin issued a package of three decrees, one of which rules out tax breaks which cut budget revenues without his approval.


But Trumilina said joint ventures qualify for breaks under article 37 of the Law on Customs Tariffs, which provides for exemptions on goods of own production exported by foreign companies until they have recouped their investment.


Six other joint ventures have enjoyed similar privileges since last October, and one since November, Gaykazov said.


The daily newspaper Segodnya said in its Friday issue that the exemptions would cost the budget about $52 million in uncollected duties, which currently stand at 23 ecus ($28) per ton of crude.


But Gaykazov and Trumilina said the losses would be insignificant compared to the value of technology and expertise brought in by foreign investors.


"The total output of joint ventures is only 10 percent of overall crude oil exports," Gaykazov said.


Trumilina said the 14 joint ventures granted exemptions make up only a quarter of the 58 oil joint ventures currently operating in Russia. She added that another five or six companies were likely to be granted similar breaks, but she declined to name the companies or say when this was might happen.


Officials have indicated that the government and president are preparing to grant priority access to the West-bound pipeline system to the export markets and to all producers, as opposed to traders, including joint ventures.