Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Kasyanov Delays Oil Tax Overhaul

At a tense meeting with the nation’s largest oil companies Wednesday, Prime Minister Mikhail Kasyanov backed down from an earlier threat to raise taxes on the industry and settled for a 40 percent hike in export tariffs.

Kasyanov also postponed until February discussions related to auctions for export quotas and a new tax system for oil producers, who many claim are not paying their share of taxes.

Tariffs on each ton of exported oil will be raised to 48 euros ($42.4). Tariffs were officially raised from 34 euros to 41 euros, but when indexed in connection with the fall of the euro to the dollar, the total becomes 48 euros.

Big oil executives are alarmed about the Kremlin’s recent attempts to strip them of excess income from exports. Kasyanov’s summit included LUKoil head Vagit Alekperov, Yukos’ Mikhail Khodorkovsky, Surgutneftegaz’s Vladimir Bogdanov, Tyumen Oil Co.’s Simon Kukes, Mikhail Gutseriyev of Slavneft and Yevgeny Terpurgov of Rosneft.

Despite Kasyanov’s insistence that he will eventually squeeze more money from the oil industry, the oil majors have not stopped lobbying. "The oil companies are exerting strong pressure on us," a high-ranking government official said after the meeting. The Tax Ministry released figures at the meeting showing a discrepancy in the rate of tax the state collects from each company. The best company paid 1,498 rubles ($53) for each ton, while the worst paid only 608.

Kasyanov and the oil majors also agreed to work toward a compromise on investment in the sector, with the companies agreeing to grant the government part of any new investment if it guaranteed stable, fiscal conditions.

Participants at the meeting said that a decision was reached to develop a methodology to determine the real, as opposed to the corporate, prices for oil to simplify tax collection. In exchange, the government is considering lowering certain taxes and completely canceling the tax on the production of raw mineral materials.

In February, the government will begin a new round of discussions on holding auctions for export quotas, Deputy Prime Minister Viktor Khristenko said in an interview. Khristenko, who has the power to grant access to export pipelines, said he will head the discussions and will consider the opinions of oil companies.

"The meeting was sufficiently strained, there were many arguments," Kukes said. "But in the end, everyone agreed that oil is the economic basis of the state, and it is necessary to establish conditions to preserve the growth tendency in that sector in order to enable Russian companies to become corporations on international standards."