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. Last Updated: 07/27/2016

Nemtsov Rules Out Cut in Oil Tariffs

Acting First Deputy Prime Minister Boris Nemtsov said Wednesday that Russia will not cut excise taxes to help oil companies get through the worldwide slump in oil prices because it would cost the government too much money.

Nemtsov broke the news to journalists following a meeting with energy ministers from the Group of Eight industrialized nations in Moscow, which discussed the dramatic fall in world oil prices and ways to cooperate in the energy sector.

Nemtsov said that Russia's move last week to lower oil transport tariffs is a sufficient break to oil majors.

"Measures have already been passed that are painful to the budget -- the budget is losing billions of new rubles -- that should help oil companies recover what they lost due to falling prices," Nemtsov said.

Oil companies in January asked the government to cut in half the 55 ruble ($9.17) excise tax levied on each metric ton of oil produced. While producers welcomed the cut in pipeline tariffs last week, they maintained that the key cut in excise taxes, which would save the industry $1.5 billion annually, was still needed.

Russian oil companies face drastically reduced profitability this year, due to a glut of oil on world markets that has dragged prices down to about $14.50 per barrel from an average of $19.30 last year.

Russia has invited top officials from the Organization of Petroleum Exporting Countries, or OPEC, to visit Moscow this month to discuss the problems accompanying the fall in world oil prices, Itar-Tass quoted Nemtsov as saying.

Russia to date has declined to follow OPEC's suggestion that Russia cut exports by 100,000 barrels per day to help reduce the oil supplies.

In addition to the falling price of oil, energy ministers gathered to draft a policy document that will be presented at a G8 summit in Britain next month. Among the goals the document sets for energy development through the year 2020 are encouraging competition among energy producers, creating stable environments for foreign investors in energy development projects and promoting nondiscriminatory access to energy transport routes.

Ministers from Russia, the European Union and the United States maintained that economics, rather than politics, should drive the construction of pipelines that will ship Caspian Sea oil to export.

Despite these assertions, debates over pipeline routes thus far have been anything but apolitical, as Russia, Western investors and Central Asian countries have hustled to ensure that their foreign policy concerns are not trampled in the rush to export Caspian oil.

The United States, for instance, opposes the construction of one pipeline that would send oil south through Iran to the Persian Gulf, U.S. Secretary of Energy Federico Pe?a told reporters after the energy summit.

Pe?a said the United States particularly favors two pipeline construction projects: the Caspian Pipeline Consortium, which is building a pipe from Kazakhstan's Tengiz oil fields to Russia's Black Sea port of Novorossiisk; and a second pipe that would ship oil from Baku to the Turkish port of Ceyhan.

"But fundamentally, these decisions will be made by the private sector," Pe?a said. "The U.S. government is not paying for these investments. "