Russia Monitor is a review of the most important events related to Russian internal and external security, as well as its foreign policies.
Date: 28 February 2023 Author: Grzegorz Kuczyński
Russia Passes Law Fixing Urals Rate For Tax Calculations
Russia is struggling to stick to the federal budget in 2023. This year Moscow will see a modest cash inflow to the budget. Moscow will never get such a petrodollar lifeline as it got last spring. One idea to save the budget is through new tax calculations.
Technocrats within the Russian cabinet will struggle to find a golden measure––to give a lifeline to the budget while making new fees acceptable for the state economy. Thus the Russian finance ministry has introduced legislation that will change the rules for calculating taxes on oil companies. Instead of relying on a $40 discount on Russia’s Urals blend compared to benchmark Brent, Russia is therefore switching to a reference point based on a fixed differential to benchmark Brent crude. The finance ministry is seeking to set the cap at $25––while oil-producing firms will be obliged to cash more in taxes. According to analysts, their profit will remain basically unchanged as the difference in prices is attributed to the companies themselves. More oil and gas sales are now going to Asia rather than Europe at a discounted rate below $35–$40. Those who actually benefit from that are foreign-based subsidiaries of oil firms. Once the new formula is in force, oil companies are stripped of any possibilities to manipulate prices and thus contribute to the federal budget, according to the finance ministry. Under the new arrangements, Russia is expected to gain up to 700 billion roubles in additional revenue. This will increase the tax burden on oil companies and help ease Russia’s budget deficit. That deficit is increasing in part due to a fall in oil and gas revenues — last month they were down 46 percent year on year in January 2023. The change would boost Russia’s state budget by 8 trillion roubles ($115 billion) in 2023.
If content prepared by Warsaw Institute team is useful for you, please support our actions. Donations from private persons are necessary for the continuation of our mission.
All texts published by the Warsaw Institute Foundation may be disseminated on the condition that their origin is credited. Images may not be used without permission.