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Press review: Putin tackles rising fuel prices and Russia eyes hiking retirement age

June 08, 13:00 UTC+3 MOSCOW

Top stories in the Russian press on Friday

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© Kirill Kukhmar/TASS

 

RBC: Government to specify scope of pension reform

Russia’s government will specify the concept of the pension reform, including the parameters of the retirement age hike, at a meeting next Thursday, RBC daily writes with reference to sources. The reform is based on the option initiated by the Finance Ministry, which implies an increase of the retirement age by five years to 65 for men and by eight years to 63 for women, a source familiar with drafting the respective bill told the paper and two sources close to the government confirmed it. One of them added that a 65/60 option for men and women, respectively, has not been ruled out as well. The government’s proposals on changes to be made in the country’s pension system will be complex, one of the sources told RBC. Particularly, it is likely that the bulk of existing retirement benefits will be maintained.

Speaking about this sensitive issue at his annual Q&A session on Thursday, Russian President Vladimir Putin stressed that the key objective that the cabinet is now facing is to raise the income of retired people, which in its turn will help tackle another crucial issue - reducing the number of citizens living below the poverty line. Putin added that he is very cautious on the issue of increasing the retirement age in Russia. President Putin promised that the measures proposed by the government would be made public in the near future. This followed Prime Minister Dmitry Medvedev speaking about the need to raise the retirement age in Russia.

The PM noted that the government was preparing its proposals and would soon submit them to the lower house of parliament for examination.

According to calculations made by experts of the Presidential Academy of National Economy and Public Administration (RANEPA), an increase in the retirement age to 65 for men and to 63 for women will provide a substantial economic effect - up to 5.5% of GDP by 2030 and 27.7% of GDP by 2050, RBC writes. However, they warn of serious demographic and social risks if an extremely high pension age target for men is set, which will not offset the financial effect. Russia’s Center for Strategic Research (CSR) headed by ex-Finance Minister Alexei Kudrin has proposed a hike in the pension age to 63 for women and 65 for men by 2034. Kudrin, who is now a new head of the Accounts Chamber, has pointed out that the government's failure to increase the retirement age nationwide was one of his mistakes as a civil servant.

 

RBC: Hike in export duties to raise Russian oil sector’s tax burden to $5.6 bln

Russia’s government initiated an extreme measure for curbing domestic prices for gasoline and other types of fuel - hikes in export duties on oil products. Experts have warned that the move may cost around 350 bln rubles ($5.6 bln) annually for the industry, RBC says. Last year Russia exported 4.2 mln tonnes of gasoline, with around half of that volume going to CIS countries (including Belarus and Kazakhstan with duty-free export supplies), and 51 mln tonnes of diesel fuel. Andrey Polischuk from Raiffeisenbank has calculated that with current oil prices and the exchange rate of the ruble, an increase in gasoline and diesel duties will add about $4.3 bln, or roughly 260 bln rubles per year, to the sector’s tax burden. Economist at Vygon Consulting Sergey Ezhov agrees, though he does not rule out that the government will raise the naphta duty. Denis Borisov, Director of the Moscow-based Oil and Gas Centre at EY, confirms that this will add over 60 bln rubles ($958 mln), bringing the total amount of additional costs for the sector to 350 bln rubles ($5.6 bln) per year.

Prices at the pump in Russia rose by 5.6% in May 2018 versus April, and by 11.3% year-on-year, according to the Russian State Statistics Service. Gasoline prices added 7.2% year-to-date, while diesel fuel prices increased 5.2% in May. In a move to stabilize the situation, the government lowered excise duties on gasoline and diesel fuel by 3,000 and 2,000 rubles ($48-32) per tonne, respectively, starting June 1. Another 700-ruble ($11) reduction is expected at the beginning July 1. Energy Minister Alexander Novak and Deputy Prime Minister Dmitry Kozak said during President Vladimir Putin’s annual Q&A session on Thursday, that the government had stabilized gasoline prices in general through urgent fiscal measures and by making oil producers raise production and exchange sales. According to Novak, hiking export duties is another measure the government has in store to influence the situation. Meanwhile, Putin called it a ‘threat’ for oil producers and expressed hope that it would not be used. Kozak pledged that the bill authorizing the government to raise fuel duties in a timely manner would be submitted to the State Duma (lower house of parliament) in the near future, adding that the measure would be used if oil firms renege on their promise to stabilize prices.

"Forecasting commodity markets" independent agency considers it possible to take control of diesel fuel price growth through doubling the duty, which will make its export price lower than that on the domestic market, Kommersant writes. For gasoline, the agency offers raising the tariff to 90% of the oil duty. This will lower the level of export alternative taking into account filling stations’ costs to below the current retail price at most Moscow stations. This option of raising duties on gasoline and diesel fuel will also add an extra 80 bln rubles ($1.2 bln) in six months to Russia’s budget, the agency said.

 

Vedomosti: Putin sets sights on bolstering nationwide road infrastructure

In a move to better connect the nation through transportation infrastructure, up to 9.7 trillion rubles ($156 bln) will be allocated for road construction in various regions of Russia, up from 5.1 trillion rubles ($81.9 bln) spent on road construction in the period between 2012 and 2017, Russian President Vladimir Putin said at the annual Q&A session on Thursday.

Some experts, among them Mikhail Blinkin, Director of the Institute for Transport Economics and Transport Policy Studies, doubt that an increase in funding to even the level of almost 10 trillion rubles would be enough for bringing regional roads closer to the level of federal highways, Vedomosti says. Though the cost of repairing regional roads is low, their stretch is 10 times as long, the expert says. Nevertheless, he admits that the declared financing will help improve the condition of roads in the country’s regions substantially. Pavel Chistyakov, Vice President of the Center for Infrastructure Economy, agrees that whether or not the funds will suffice for maintaining roads is not obvious yet.

Speaking about the issue of poor road quality at his annual Q&A session, President Putin said that roadway construction and territorial transport connectivity will be among the high-priority tasks for the next six years. The issue of road construction is still relevant, President Putin said, adding that it is necessary to make sure that not only federal, but also regional highways are in fair condition. The task requires doubling of amount of funds allocated for road construction within the next six years, he said. A special fund worth 3 trillion rubles ($48 mln) will be set up inside the budget aimed at financing roads and other infrastructure, the newspaper writes. The idea to boost those investments has been voiced by Alexei Kudrin’s Center for Strategic Research, with a hike in budget spending on infrastructure of 0.8% of GDP versus the level of 2017 was offered by 2024.

 

Kommersant: Quebec-hosted G7 summit faces tensions over trade war

The G7 summit kicking off in the Canadian city of Quebec later on the day may set a precedent of ending without a general declaration signed, Kommersant says. Western media have been increasingly focusing on the current problems inside the informal club, rather than on clashes between anti-globalists and the police that are usually in focus on the eve of G7 summits.

The leaders of France and Germany made it clear that they are not going to sign an ‘empty’ document for the sake of a compromise. The fact that the upcoming event may end without issuing a traditional general statement that reflects a consolidated position of its members regarding most pressing global issues, demonstrates the seriousness of the current frictions, the paper writes. It also noted how challenging it is likely to be for G7 countries (Britain, Germany, Italy, Canada, the US, France and Japan) to share positions on a number of relevant foreign political issues, after the US pullout from the Iranian nuclear deal and the US embassy move from Tel-Aviv to Jerusalem.

The most heated discussion among G7 states is currently on trade after Washington slapped new tariffs on steel and aluminum products - 25% for steel and 10% for aluminum valid for all countries supplying products to the US. Australia, Argentina, Brazil, Canada, Mexico, the Republic of Korea, as well as EU countries were granted a deferral until June 1.

Before flying to Canada, German Chancellor Angela Merkel said that the discussion of the issue might be problematic. French President Emmanuel Macron was even tougher, saying that the US may find itself in isolation. Andrey Sushentsov, Head of the Foreign Policy analytical agency and Program Director of the Valdai Discussion Club, presumes that all G7 are still interested in finding compromises. "The members of the club are actively experimenting, though the upcoming summit is unlikely to become a breakthrough event," he told Kommersant. "Though the G7’s role is more symbolic in global politics, it remains as one of the markers of western solidarity," the expert said.

 

Kommersant: Despite differing views at times, Moscow and Yerevan remain partners

Russia and Armenia have a shared understanding, though the two countries do not agree on all issues, Armenia’s Foreign Minister Zohrab Mnatsakanyan said in an interview with Kommersant. "We are two partners, allies having a deep background in bilateral collaboration. When we say that we are allies, we mean that we discuss all existing issues. We do not say that we agree on all issues concerning our relations with each other, but we are able to work together, compare (views), reach agreements and move forward," he said, adding that he finds it great that the two partners can "find frameworks for creating a field for mutual understanding and coordinating positions."

Speaking about Armenia’s approach to cooperation within the Eurasian Economic Union (EAEU), the diplomat said that the country "uses the mechanism for its consolidation and development." "The EAEU is a very important mechanism that spurs growth, and we are using it. It is a very good form of collaboration between partners. It brings us to big markets, enables us to work freely in partner countries, cooperate in a long list of areas," he explained. "We have dialogue with the US, relations with EU, so this all is there. But we are partners with Russia, we contribute to the consolidation of our security system and development," the minister said.

 

TASS is not responsible for the material quoted in the press review

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