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. Last Updated: 07/27/2016

Shuvalov Tells Anti-Monopoly Service to Go Easy on Big Oil

VedomostiFirst Deputy Prime Minister Igor Shuvalov. Shuvalov urged the FAS on Tuesday not to fight with oil companies. “We don't need to fight with Transneft or Gazprom. They are leading our development," he said.

SUZDAL, Vladimir Region — First Deputy Prime Minister Igor Shuvalov urged the Federal Anti-Monopoly Service not to fight with oil companies Tuesday, reproaching the watchdog over what has become one of its most important battles.

Shuvalov's comments, made in the presence of Federal Anti-Monopoly Service chief Igor Artemyev, mark an apparent turnaround from a hard-line position taken by Prime Minister Vladimir Putin in 2008, when he called on the anti-monopoly service to "wake up" and start investigating major Russian oil companies for what he said were exorbitantly high gasoline prices.

"Igor Yurevich [Artemyev] spoke about a war. … We don't need to fight with Transneft or Gazprom. They are leading our development," Shuvalov said at a conference commemorating the 20th anniversary of the anti-monopoly service.

"Oil companies are a huge resource for us. They are the engine of our economy," he said, adding that the service should focus on combating legal violations by influencing the incentives offered to big companies.

Since Putin's original reproach, the anti-monopoly service, known by its acronym FAS, has transformed into one of the most influential and aggressive government institutions.

But the agency's achievements have been mixed. It has levied record fines against the country's five biggest oil companies — Rosneft, LUKoil, TNK-BP, Gazprom Neft and Surgutneftegaz — but few of the fines have survived the appeals process.

Toward the end of last month, however, the agency scored a key victory. On May 25, the Supreme Arbitration Court overturned a lower-court decision and ordered TNK-BP to pay 1.1 billion rubles for pricing refined products excessively high in 2008.

The average price for a liter of gasoline reached 23.4 rubles in August 2008, when the worldwide financial crisis was just making its way to Russia. The price for Russia's Urals blend crude plummeted from about $140 per barrel in June 2008 to nearly $30 per barrel in December 2008. The gasoline price soon followed, dropping to 17.55 rubles per liter in May 2009.

The anti-monopoly service said the decline in gasoline price was incommensurate with the fall in oil prices and that the oil majors were deliberately keeping prices unjustifiably high.

The Supreme Arbitration Court's decision seemed to have had an effect: Shortly after the court decision, Rosneft, which is disputing a 5.3 billion ruble fine, approached the anti-monopoly service about reaching a peaceful settlement on the issue.

Artemyev said Tuesday that Rosneft's fine could be lowered as much as 75 percent if a settlement was reached, but that would require the state-owned oil company to admit its guilt. He added that a settlement would also require the permission of the Cabinet.

Calls to Rosneft spokesman Nikolai Manvelov went unanswered Tuesday evening.

Shuvalov's remarks might indicate that he was signaling for a softer line toward the retail business of some oil companies that are about to lose their export duty holidays for East Siberian crude, said Alexei Kokin, an analyst at Metropol.

Oil majors may have to rely on retail sales for the best profit margins because hefty export duties erase most of their profits from shipping crude abroad.

The ambivalence on the part of the government toward the anti-monopoly service reflects an economy dominated by state-owned monopolies in which the government is nevertheless trying to keep down consumer prices. The agency's tough line on the oil companies certainly has its backers.

Oganes Oganyan, chairman of the Federation Council's Committee on Economic Policy and Entrepreneurship, proposed at the Suzdal conference the "radical idea" that the anti-monopoly service should be given the powers of a law enforcement agency.

"There is no way it is going to happen,” Shuvalov quickly responded.  

“It is a debatable question,” Oganyan said, attempting to move on with the speech he had prepared.  

But Shuvalov would not let go. The current government position on this subject is clear: The anti-monopoly service will not be a law enforcement agency, Shuvalov said.