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Gasoline excises may be reduced in Customs Union

March 19, 2014, 19:59 UTC+3 MOSCOW

However, if Russia is not ready to lose $30 billion and all restrictions are cancelled, the sides will have to seek other options

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© ITAR-TASS / Alexander Ryumin

MOSCOW, March 19. /ITAR-TASS/. Gasoline excises can be considerably reduced if the Customs Union of Russia, Belarus and Kazakhstan drops mutual tariff restrictions, Russian Deputy Finance Minister told Sergey Shatalov told journalists on Wednesday.

There are several options to resolve the issue.

“These scenarios will be chosen by presidents, these are political decisions. All these scenarios concern one question — whether we retain or not, or partly retain tariff and non-tariff restrictions, acting in mutual trade in petroleum products among the three countries,” explained Shatalov.

He cited many of the acting restrictions, such as quotas for oil supplies to Belarus and Kazakhstan, Belarus’ liability to set export duties on petroleum products at the Russian level and pay them as a partial compensation, Kazakhstan’s ban on supplies of clean petroleum products in its territory, and prohibition of dirty petroleum products supplies from Russia to Kazakhstan.

“If we take the most aggressive scenario, when we drop all tariff and non-tariff limits, our oil companies cease exporting oil and petroleum products and they are exported by traders’ subsidiaries in Kazakhstan and Belarus, and no taxes are paid there, then we are losing a huge amount of money — about $30 billion a year,” said Shatalov. “If we retain all restrictions, we hardly lose anything, we can follow the current maneuver, namely drop export duties by two percentage points and increasing MET [mineral extraction tax]. Everything is going on calmly, painlessly, we shall not need any complicated operations.”

If Russia is not ready to lose $30 billion and all restrictions are cancelled, the sides will have to seek other options — “quickly reduce export duties, thus reducing the losses, and increase MET, accordingly, compensate for these losses,” Shatalov explained. “Then domestic oil price will sharply rise, and to prevent motor fuel price growth, we’ll need to sharply cut gasoline excises.”

It remains unclear, he added, to which extent the sides were ready to make concessions.

“This is a hard negotiating process; the three states’ interests do not quite coincide. We need to seek a compromise. When we find one, it will be clearer how to maneuver further,” said Shatalov.

He did not rule out that “depending on decisions on oil and petroleum products, it is quite possible Russia will have to play with our gasoline excises, and, as an option, cancel them”.

The next round of talks is due in mid-April; the basic agreement is expected to be signed in mid-May.

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