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. Last Updated: 07/27/2016

Yasin: Government Plans to Preempt Inflation

The government Monday launched a preemptive strike in the battle against inflation, saying it would stem any seasonal upsurge in prices this fall by placing a ceiling on money-supply growth and setting its sights on extra revenues from Russia's giant oil and gas companies.


"We have to sustain the current positive trends and prevent these trends from being reversed, to prevent the inflationary cycle," Economics Minister Yevgeny Yasin told reporters after a government meeting on economic policy.


In particular, Yasin singled out the massive natural-gas monopoly Gazprom as a source of extra cash for the budget.


The powerful company currently enjoys a range of tax exemptions and any attempt to erode these would almost certainly meet with fierce opposition.


Monthly consumer price inflation continued its six-month downward spiral in July, clocking in at 5.5 percent for the month, Yasin said, down from 6.7 percent in June and 17.8 percent in January.


In previous years, price rises have slowed during the summer months, only to refuel in the autumn as credits were granted to agriculture. Parliamentary elections looming in December make this a particularly trying time to pursue a tight-fisted monetary policy.


Nevertheless Yasin said the government has prepared a resolution targeting growth of the base money supply at between 1.5 and 2 percent a month for the rest of the year.


Russia's monetary base expanded rapidly in the second quarter as the Central Bank printed rubles in order to accumulate large reserves of hard currency.


Yasin said inflation was braking more slowly than the government had hoped, and cited the tax privileges of Russia's natural monopolies as a major contributing factor.


Because inflation is still relatively high, Yasin said the government needed to collect an additional 7 trillion to 8 trillion rubles ($1.6 billion to $1.8 billion), which he said would be achieved partly by squeezing Gazprom.


Yasin said the economics and finance ministries are looking at the possibility of abolishing export privileges granted under a special stabilization fund for the giant company.


"Rumors about the fabulous riches of Gazprom are spreading, but during the last three years no one has made a serious attempt to look into its financial status," he said.


He added that the ministries are also considering increasing excise and export duties for natural gas.


Swedish economist Anders Aslund has estimated that Gazprom alone could contribute 7 percent of gross domestic product in taxes.


But the huge company -- reckoned by some to be potentially the world's largest -- is said to have powerful political ties.


Duma Budget committee chairman Mikhail Zadornov told Interfax on Monday that Prime Minister Viktor Chernomyrdin is a strong ally of the gas sector.


Zadornov said that if the government does not raise export duties on gas, "this is a clear sign that the prime minister places preferential financial conditions of the gas industry before the interests of fulfilling the [1995] budget," Interfax reported.


Chernomyrdin, who headed Gazprom before becoming prime minister in 1992, also served as the Soviet Union's last energy minister.


Other revenue-raising measures could include introducing an excise tax on oil transportation and a revision of the procedure for gaining access to pipelines under which users of congested pipeline routes would pay higher fees, Yasin said.


Speaking after Monday's government meeting, Finance Minister Vladimir Panskov said tax revenues in the first half of the year exceeded targets by 12 trillion rubles, mainly because inflationary targets were not met.


The budget deficit as a percentage of GDP was consequently smaller than projected, at 82 trillion rubles, or 3.9 percent of GDP.


Panskov said the government had received 3.6 trillion rubles less than anticipated from privatization receipts, and expressed doubt that the government will earn a projected 9 trillion rubles from state sell-offs by the end of the year.