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. Last Updated: 07/27/2016

Protests Mount Against Gas Tax Bill

Prime Minister Sergei Stepashin faced mounting opposition Tuesday to gasoline tax bills aimed at pleasing the International Monetary Fund's demands that Russia increase state revenues.

The Russian fuel lobby warned the government that the proposed tax laws would drive prices up if approved and would be a litmus test for Stepashin's commitment to a free market.

"We cannot predict the pace of growth but prices for gasoline will pick up," said Sergei Borisov, president of the Russian Fuel Union.

He warned that the quality of gasoline could also deteriorate as traders stopped buying quality fuel and switched to cheap substitutes as they did last September when the ruble crashed.

Meanwhile, Communist Party leader Gennady Zyuganov said that his faction, the largest in the lower house of parliament, will vote against the IMF-sponsored package that includes the bill when it hits the floor of the State Duma on Wednesday.

The government is desperate to get the unpopular series of measures passed in order to unlock some $7.5 billion in international loans and save Russia from complete sovereign-debt default.

Stepashin met Tuesday with the leaders of the main Duma factions and urged them to use their influence to get the draft law passed in its first reading.

Even an idea he has floated several times - most recently Monday - of freezing gasoline prices until year's end, may fail to answer Duma deputies' concerns about the impact the gasoline tax might have on ordinary Russians.

That suggestion drew further scorn from industry figures. "On the one hand, the government seeks to appease the IMF, but on the other they seek to use administrative measures to regulate prices and this was never IMF policy," said Maxim Viktorov, deputy president of the Russian Fuel Union.

Others simply doubted whether a price freeze could be enforced.

"We've already seen examples of the inefficiency of administrative measures in the economy," Borisov said.

However, price controls may be the only way of getting the bill past the Duma, parliamentarians said.

"The passage will not be an easy one. Everything will depend on how successful the government is in persuading [the Duma] that it will take all possible measures not to allow a price rise," State Duma budget committee head Alexander Zhukov said Tuesday.

Yury Shafranik, president of Moscow city owned Central Fuel Co. and a former fuel and energy minister, also expressed concern regarding Stepashin's talk of establishing partial government control over prices for oil products in Russia.

Recent price rises were caused by movements of world markets. "We are catching up with world oil prices," Shafranik said.

High world oil prices have caused booming exports of crude and refined oil products, drying up domestic supplies.

Even though gasoline prices rose in past weeks, seasonal demand has caused consumption in the Moscow region to jump 25 percent to 30 percent over the past few days, Shafranik said.

That has shrunk oil stocks and if taxes and a price freeze are imposed at the same time, it is hard to see how the government will stop gasoline supplies drying up.

In late April, St. Petersburg motorists found out how inconvenient low local prices and high world prices can be, as numerous filling stations simply ran out of gas.

Eduard Gismatullin contributed to this report.