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. Last Updated: 07/27/2016

Red Tape Chokes Flow of New Stations

A network of private gasoline stations is growing in Moscow, joining city-run outlets and displacing mobile sellers. But one thing remains the same, operators say: City bureaucracy makes doing business a headache, or worse.

Motorists in need of a fill-up can now stop in at any of 120 private stations -- where prices often are higher than city outlets -- or another 215 run by the municipal government.

Under a city program announced last year, however, the trucks that used to be seen everywhere selling fuel directly on the streets have been banned from inside city limits.

More than 300 stations are due to be built under the city's program, but operators say they face construction delays because of bureaucratic hoops the Moscow city government is forcing them through.

"More than 150 separate approvals are necessary to get a plot to build a gas station," said Gennady Chumak, general director of LUKoil-Moscow, which last month opened its second Western-style station in the city. "A draft project, a working plan and the final version must be signed by the same bureaucrats."

"This saga will last at least 15 years because all participants in the program are in no-win situation," he added.

The owner of another private gasoline-trading company agreed, saying: "They demand too much because we are independent. But for us it is difficult to satisfy the appetites of authorities and the individual demands of interested officials."

A city official, Igor Troitsyn, a senior specialist in the department of transportation and communications, declined to comment on private gas businesses, referring questions to a deputy director away on business.

Plenty of pitfalls await those planning to build gas stations in Moscow. For one, many of the plots set aside by the city for this purpose are already occupied by private garages, junk yards or even marshland.

A second barrier is price. An investment of about $1.3 million to $1.5 million is required to construct a gas station, operators say, with a reasonable return taking 11 to 12 years because of high taxes.

Owners are not guaranteed a long-term rent agreement after construction of stations, and the rent for their plots may be increased sharply.

The regulatory hurdles are the greatest inconvenience.

Igor Altman, the general director of Firma Ilyi Kolerova, which operates 15 container gas stations in the capital and the Moscow region, said unreasonable demands by authorities are hindering the development of private gas stations.

As an example, he cited one city department whose representatives first told him a brick fence must surround one of his company's stations, then later said a concrete barrier was required.

"And you know very well how an agreement is reached," Altman added.

Businessmen say the city-sponsored Association for the Support of Independent Gas Stations -- which includes about 40 companies involved in fueling, car-washing, and construction -- is, in fact, no support at all.

"There is no benefit from it," said Altman, whose firm is a member. He said the association "exists only on paper."

LUKoil is resisting joining the association.

"We are not joining out of principle," LUKoil's Chumak said. "These are people who have found their own way to make money: They write statutes for companies and carry out various expertises that nobody needs."

An association spokeswoman contested such a characterization.

"This statement does not correspond to reality," Yelena Stukacheva said, adding that all members of the organization are satisfied with its activities.