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. Last Updated: 07/27/2016

Duma Poised to Reject Gas Tax Bill

Despite cajoling and wheedling by the Russian government and the IMF on Wednesday, an embattled gasoline tax bill looked all but doomed to fail when it comes up for debate in the State Duma on Thursday.

Fearing the bill f a new tax on gasoline pumps f would cause gas prices to rise and drag prices on consumer goods skyward, the leftist opposition in the Duma announced they would vote in lock step against the bill. The liberal Yabloko faction followed suit, nearly guaranteeing the bill would fail.

Hours before the Communists, the biggest faction in the State Duma, or lower house of parliament, announced their opposition Wednesday, Prime Minister Sergei Stepashin lobbied deputies to pass the bill before the Duma recesses at the end of next week.

The bill, along with others agreed on with the International Monetary Fund, is needed to unlock frozen credits and prevent Russia from defaulting on foreign loans, Stepashin said.

If the bills "pass the State Duma and Federation Council, then a fairly large payout should come after the IMF board of directors meets in July," Stepashin was quoted as saying by Interfax after meeting IMF Managing Director Michel Camdessus at the St. Petersburg Economic Forum.

Camdessus said Stepashin's government was on the right track to reform and promised that the IMF would try to support him.

In April, the two sides agreed on a $4.5 billion credit over 18 months. In return, the Russian government promised to increase its revenues by $4 billion over six months by pushing through a raft of banking and tax bills. Several have passed first readings in the Duma and await final approval.

The filling-station tax has been delayed by deputies' fear of consumer anger in an election year. "We are in fighting mode," said a spokesman for the Communist-allied Popular Rule group.

Even Deputy Sergei Don of the Yabloko faction, an author of a compromise version, washed his hands of the bill Wednesday, saying it had been distorted by government amendments introducing effective gas price controls.

"Efforts to hold down prices and the forcefully expressed interests of international financial institutions are already producing completely negative results," Don said in an interview Wednesday. At best, he said, the bill "would bring about a rise in corruption and a huge rise in prices. At worst it would lead to deficits and lines for gas."

"If that happens, it will be very difficult to explain to the voters," he said. Deputies could either kill the bill altogether Thursday or send it back for another round of negotiations with the government.

An agreement between energy companies to hold prices down despite the tax hike, orchestrated Wednesday by the government, failed to placate deputies.

Camdessus, apparently hedging against a possible defeat, said the IMF was more interested in fiscal transparency and low inflation than specific laws, Interfax reported.

Communist deputies scoffed at the risk of losing the agreed-upon credit, despite the risk of default. Several budget items, including some coal-industry restructuring and social sector expenses, are also covered by foreign credits in the 1999 budget, which envisages $7.5 billion in international loans. But the credits would mainly enable Russia to pay off previous debt to the IMF.

"Since Aug. 17, essentially from July of last year, our country, God forbid, has been living without credits from the IMF or World Bank," said Communist Deputy Sergei Shtogrin, who sits on the budget committee. "By the efforts of our economists, we are fulfilling the budget ? and by the efforts of our diplomats, we are making agreements on payment delays. We are working without cataclysms.

"I think [the IMF] sees we can work, and that it's not only in our interests to give us money. It's in their interests, too," Shtogrin said.