The Russian authorities have submitted to the State Duma a bill that revises the method for setting the price of Urals crude for tax purposes. The document, released on 11 February, places the proposal into the legislative base of the lower house for consideration.
The ministers’ proposal does not directly alter the export price of Russian oil. Instead, it defines the parameters that will determine how much tax flows into the state budget. The changes establish a base price for the raw material used in calculating several taxes, shaping the fiscal framework for oil production.
Specifically, the measure affects amendments to the Tax Code of the Russian Federation that will influence the mineral extraction tax (MET), the additional income tax (AIT), and oil excise duties.
The Ministry of Finance will continue to guide price references for Urals using data from the international agency Argus. However, if the average monthly price of Urals falls below a predetermined threshold, the authorities will switch to the Brent crude reference price minus a fixed discount for taxation purposes.
As an illustration, if in April Urals trades at a discount exceeding $34 relative to Brent, the tax base for the export of Russian crude will be treated as the Brent price minus $34 per barrel. Each month the fixed discount is scheduled to decrease. In May, with a substantial decline in Urals prices, MET, AIT, and excise duties will be calculated as if Urals were trading at a $31 per barrel discount to Brent. In June that discount will drop to $28, and in July to $25 per barrel.
The Finance Ministry described this as a transitional period designed to help oil companies adjust to the new tax calculation method anchored to Urals prices.
The government bill also contemplates tax credits for hydrocarbon producers operating in the Yamal region through MET tax deductions. Oil producers would be eligible to reclaim this credit in tax periods running from 1 April 2023 to 31 March 2029.
Recent reporting from Bloomberg indicated that Russian officials have explored several options for revising the MET calculation formula for oil, including Brent minus $25 and Brent minus $20. Earlier, Argus had estimated that Urals traded at about a $35 discount to Brent.
At week’s end, North Sea Brent crude traded near $88 per barrel, while Urals were around $58.43. In the April futures market, Brent was quoted around $86.50 per barrel. If these levels hold into April, the Russian Ministry of Finance would likely keep Urals at a minimum of roughly $52.50 per barrel when calculating MET, AIT, and excise duties.
On 5 December, European Union members, the G7, and Australia established a price cap for shipments of Russian oil to non-participating buyers, limiting purchases to under $60 per barrel. Following that cap, a lack of buyers sent Urals prices temporarily lower, though price movements rebounded later. Analysts note that it has become difficult to rely on traditional international bodies like Argus to determine world prices for Russian oil since sanctions have complicated the trading flow. The resulting ambiguity means the gap between official estimates and actual transaction prices can widen by several dollars per barrel, sometimes by tens of dollars, depending on market conditions and sourcing.