The Russian government has submitted to the State Duma a bill amending the methodology for setting the price of Ural oil for tax purposes. The document was released on 11 February. placed in the legislative base of the lower house of parliament.
The proposal of the Council of Ministers does not directly affect the export price of Russian oil, but sets the parameters that will determine how much tax will go to the budget. Authorities set a base price for raw materials to be used in calculating taxes.
We are talking about changes in the Tax Code of the Russian Federation, which will affect the mining tax (MET), additional income tax (ATD) and oil excise taxes.
The Ministry of Finance, as before, will guide citations in the Urals by the data of the international agency Argus. However, if the average monthly price of Russian oil is below a certain value, the authorities will use the world price of the reference brand Brent minus a fixed discount for taxation.
For example, if in April a barrel of Ural is traded at a discount of more than $34 from the price of Brent, the government will treat the taxes on the export of Russian raw materials as the cost of one barrel of Brent minus. 34 dollars.
Each month this fixed discount will decrease. In May, with the strong fall in the market price of Russian oil, MET, AIT and excise duties will be calculated as if the Urals were trading at a discount of $ 31 per barrel to Brent. The tax cut will be $28 per barrel in June and $25 in July.
“Such a transitional period to apply a discount to the Brent price will allow oil companies to adapt to the implementation of a new tax calculation procedure based on Ural prices,” the Ministry of Finance said.
The government bill also suggests that companies producing hydrocarbons in Yamal can receive tax credits through the MET tax deduction. Oil producers will be able to refund this money in tax periods between April 1, 2023 and March 31, 2029.
Bloomberg reported this week that Russian officials have selected several options to change the MET calculation formula for oil – “Brent minus $25” and “Brent minus $20”. In January, Argus estimated that the Russian oil Urals discount to Brent was $35.
Last Friday, at the close of trading, North Sea oil Brent was trading at almost $88 a barrel, while the Urals were trading at $58.43 a barrel.
It is trading at $86.5 per barrel on world stock markets for April futures. If this price is maintained until April, the Russian Ministry of Finance will keep the Urals at a minimum of $52.5 per barrel when calculating MET, AIT and excise duties.
On December 5, the EU countries, the G7 and Australia set a price cap for overseas deliveries of Russian oil – the participants of this agreement will not buy raw materials if the price is above $ 60 per barrel. Then, due to the lack of buyers, the price of the Urals fell to $ 43.7 per barrel, but then rose again.
At the same time, Western analysts noted that it is no longer possible to rely on international organizations such as Angus, whose calculations have traditionally been used to determine world prices of raw materials. Since the oil trading procedure itself has become incomprehensible due to anti-Russian sanctions, it is impossible to accurately determine the source of the raw materials, and analysts can be mistaken in their cost estimates. And the difference between its data and the actual purchase price can even reach several tens of dollars per barrel.