Russia reaches deal on eastern Siberian oil duties

Deputy Prime Minister Igor Sechin led a meeting to decide how to compensate the federal budget for lost revenue.
Customs rules allowing the duty-free export of oil from 13 fields in eastern Siberia will no longer be in effect from Jan. 19, a source at one of the state bodies involved in the matter told.

From Jan. 1, 2010, a new customs framework took effect as part of Russia's customs union with Belarus and Kazakhstan. Under the rules, the oil from these fields was given a new customs code, while the actual tax breaks were extended to a total of 22 fields.
But the government order establishing the duty-free oil exports uses the old customs code, which was introduced when there were only 13 fields qualifying for the discounted export duty.

The Federal Customs Service corrected the order so that effective Jan. 19 the discount is extended to all 22 fields in eastern Siberia. The Finance Ministry was opposed because it had found that the changes would cost the budget about RUB 80 bn ($ 2.6 bn) this year, sources told.
At a meeting chaired by Deputy Prime Minister Igor Sechin, Finance Minister Alexei Kudrin, who also holds the rank of deputy prime minister, agreed to a compromise option. Under the deal, oil exports from the 22 fields would remain duty-free from Jan. 19 through March 1, but by the spring a special working group would reanalyze the situation at the fields and propose ways to compensate for the falling budget revenue.

One of the options was to reintroduce the duty for eastern Siberia but at a discounted level from the standard rate (from Feb. 1 the duty should be $ 270.7 per ton), the sources told.
Since the relevant government agencies are now in agreement, the discounts will be in effect for all 22 fields effective Jan. 19. The government will now just have to make the appropriate changes to the original order, which will be retroactive, one of the sources said.