President Putin had to go out and try to calm everyone down, saying that the government did not react in a timely manner to changes in the global market amid rising oil prices, though generally oil producers and the government had agreed on how they would move forward.
However, Putin’s rhetoric about an agreement proved unfounded. In fact, the Russian government simply and heavy-handedly introduced on September 21
“a temporary restriction on the export of gasoline and diesel against the backdrop of the record rise in fuel prices within the country and shortages in some regions.”
It is claimed that by doing this, officials are seeking to force oil companies to agree to the introduction of prohibitive duties ($250 per tonne) on the export of motor fuel for companies that have not yet supplied the required amount of fuel to the domestic market.
Russian business, however, is expert at circumventing not only foreign sanctions, but restrictions imposed by its own government too.
Another factor should also be taken into account: according to oil companies, if the export of diesel is banned, then there is nowhere to put such volumes in Russia, since approximately every second tonne goes abroad. This means that if diesel fuel is not allowed to be exported, then it will not find buyers inside the country. The point here is not even prices, but the physical volume of fuel (in particular, marine fuel) needed by Russian transport.
Still, refineries should not be shut, so then where should the oil taken out of the ground go? In this scenario, refineries would be forced to export – instead of diesel – what is easiest to sell abroad – less profitable naphtha (a product of only the first stage of crude oil distillation). But then oil company profitability will suffer. And then where will the Ministry of Finance get taxes from?Foreign trade: the government decides to take money from exporters
The main news of September in this regard was the introduction of an “exchange rate rent” on goods exported by Russian companies. This “novelty” was invented, as far as we know, by the Ministry of Finance. After all, according to the ministry’s estimates, RUB 500-700 billion is needed to balance the budget this year. So, they decided to get this money from an additional duty (from October 1 of this year until October of next year) on a wide range of exported goods that is to be tied to the ruble-dollar exchange rate (the weaker the ruble, the higher the rate). The idea is that the more the ruble depreciates, the more revenues exporters will generate in rubles.
It would seem that since exporters will have more revenues in depreciating rubles, their profits will also be greater, which means that the tax service will collect more taxes for the Ministry of Finance anyway. Why then invent such a duty?
Amid the ruble depreciation and the accelerating inflation it is fueling, the ruble costs of exporting companies will also increase. This means that it is still difficult to say what kind of profit exporters will actually make and how much the tax service will be able to take. Thus, the Ministry of Finance decided not to risk it – meaning not to share the risks of depreciation/inflation with exporters – and shake them down “right at the border” with the temporary duty.
It remains unclear how exporters will react to this. But one cannot expect them to show particular zeal for increasing imports, which feed the budget with various payments and the country as a whole with the currency to pay for imports.