Russia Eyes Oil Tax Hike as Pressure Mounts

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The Russian government is eyeing changes in taxes for the oil and gas industry as it tries to balance its budget needs with those of energy companies at a time when the industry is under pressure from severe Western sanctions. The finance ministry is looking at hiking taxes as a G7 price cap on Russian oil exports and the EU's ban on imports of Russian oil — which take effect on Dec. 5 — threaten Russian hydrocarbon volumes. Such a move could put additional financial pressure on Russian companies at a time when sanctions and an exodus of Western investors from Russia have already raised questions about their future investment capabilities. The finance ministry has sought to assure the industry that the planned tax hikes will maintain a balance between the government's budget needs and companies' needs to reinvest a portion of their profits. Measures can also be revisited depending on how events unfold in the coming months. Moscow is now set to approve tax changes that will hike the fiscal burden on the oil and gas industry over the next three years and bring the federal budget some 3 trillion rubles ($49 billion) of additional payments. Gas producers will bear the biggest new burden. Gazprom — the sole exporter of Russian gas via pipelines — will pay an extra 50 billion rubles a month in 2023-25 due to a proposed hike in the mineral extraction tax (MET) that applies exclusively to that company. All told, adjustments to Gazprom's MET will yield over 2 trillion rubles in additional budget revenues over the next three years. LNG is also targeted. Profits on LNG exports will be taxed at a rate of 34% in 2023-25, up from the present rate of 20% — a move expected to bring in over 200 billion rubles a year of additional budget revenues.

Sanctions, Fiscal Terms
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