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. Last Updated: 07/27/2016

6 Oil Firms Pay $1.1Bln in Tax Debts

Six of Russia's largest oil firms have paid tax debts to the state worth 6.6 trillion rubles ($1.1 billion) in return for extra export access, Russia's new fuel and energy minister, Sergei Kiriyenko, said Thursday. He vowed to press ahead with oil privatizations, despite recent setbacks.


Kiriyenko said that 1.3 trillion rubles of the oil companies' arrears was paid in cash. The companies had agreed to pay off their arrears to the federal budget by Nov. 15, and fulfilled that promise.


"We had a plan, and we have overfulfilled that plan," Kiriyenko said at a news briefing. "We have collected 6.6 trillion rubles, of which 1.3 trillion was in cash."


State Tax Service head Alexander Pochinok said seven oil companies had paid their taxes in full, but one of those -- Surgutneftegaz -- had no arrears anyway. The other six Pochinok listed were LUKoil, Tyumen Oil Company, Yukos, Slavneft, Tatneft and Sidanko.


Kiriyenko said the success of the scheme so far was only the first step in the battle to bring down energy companies' crippling debts.


Counting only Russian energy companies which owe the state more than 100 billion rubles, the total owed stood at a staggering 44 trillion rubles at the beginning of October. And that is just debts to the federal budget.


The oil companies named by Pochinok had agreed with the government to pay off their arrears by a certain date for extra oil export pipeline access.


Discussing upcoming oil privatizations, Kiriyenko said the sooner the sales took place the better for a government strapped for cash and struggling to make ends meet in this year's budget.


But he was also keen to avoid the political scandal surrounding two of this year's biggest privatizations, namely of stakes in telecoms holding company Svyazinvest and metals and mining group Norilsk Nickel.


"Our position is that the sooner the privatization of Rosneft happens, the better," Kiriyenko said.


State oil company Rosneft is the largest oil company yet to be sold in the final passage toward a fully liberalized oil producing sector.


Kiriyenko said the sale would not be held before the start of next year because legal issues still had to be resolved.


"There will be a very high level of competition, and the losers are bound to take offense. So we need to look at all the legal aspects. It would be much worse if we hurried."


He left no doubts as to his pro-privatization credentials, stressing benefits of denationalizing the key oil sector and attracting cash-rich foreign bidders.


"Four years ago Rosneft and LUKoil were compatible companies. Now, after four years, the privatized company is far more competitive than the non-privatized one," he said.


LUKoil, Russia's largest oil company, is seen in the West as a model for the dozen or so other vertically integrated oil groups in Russia.


Kiriyenko welcomed news this week that two alliances grouping Russian and Western oil and gas giants were looking at bidding for Rosneft.


"We are very happy at this news and fully support it," Kiriyenko said. "The more competition, the more money the privatization brings."


A three-sided team joining LUKoil, Gazprom and Royal Dutch/Shell is set to bid against a British Petroleum/Sidanko alliance.