Russia's Parliament Approves Higher Oil Export Tax and Unified Production Tax Rate

Strategic Insights -

The Russian parliament has approved a new law that will significantly raise the oil export tax and the unified production tax rate, aiming to capture a larger share of the windfall profits from high world crude prices. The new tax rates will take effect in August, with the export duties expected to increase by $1.98 billion a year at an average oil price of $27/bbl and by $3.48 billion/yr at an oil price of $30/bbl. The unified production tax rate will rise to 400 rubles/metric ton ($1.90/bbl) from the current level of 347 rubles/ton ($1.66/bbl), expected to bring in an additional $616 million/yr and $819 million/yr, respectively.

Key Takeaways:

  • The Russian parliament has approved a new law that will increase the oil export tax and unified production tax rate, aiming to capture a larger share of the windfall profits from high world crude prices.
  • The new tax rates will take effect in August, with the export duties expected to increase by $1.98 billion a year at an average oil price of $27/bbl and by $3.48 billion/yr at an oil price of $30/bbl.
  • The unified production tax rate will rise to 400 rubles/metric ton ($1.90/bbl) from the current level of 347 rubles/ton ($1.66/bbl), expected to bring in an additional $616 million/yr and $819 million/yr, respectively.
  • The additional budget revenues will go into a special stabilization fund, which was set up at the end of last year.
  • Oil companies, including Lukoil, have expressed resigned indifference to the tax hikes, attributing them to the state's desire to get additional funds into its coffers rather than necessitated by a need to stabilize the domestic market.

Statistics:

  • The new oil export tax is expected to bring in an additional $1.98 billion a year at an average oil price of $27/bbl and $3.48 billion/yr at an oil price of $30/bbl.
  • The unified production tax rate will rise to 400 rubles/metric ton ($1.90/bbl) from the current level of 347 rubles/ton ($1.66/bbl).
  • The additional budget revenues from the new taxes are expected to be $616 million/yr and $819 million/yr, respectively, at oil prices of $27/bbl and $30/bbl.
  • The oil companies have expressed a measure of resigned indifference to the tax hikes.

Sources:

  • NC (April 8, p4)
  • State Duma lower house of the Russian parliament
  • Federation Council upper house of parliament
  • President Vladimir Putin
  • Lukoil