The head of Russian oil major Rosneft, Igor Sechin, has criticized the Finance Ministry’s tax policy, which he claims provoked a crisis in the domestic fuel market. He also took aim at the country’s Central Bank for a lack of “reliable” routes for cross-border payments in various currencies and for a series of sharp interest rate hikes.
The fuel crunch in the domestic market that Sechin believes came about due to mistakes by the Finance Ministry led to the government imposing temporary gasoline and diesel export restrictions in order to stabilize prices.
“The company’s activities are greatly influenced by constant changes in the industry’s taxation system. A decision to reduce the damper provoked a crisis in the domestic fuel market in August-September of this year,” the Rosneft CEO wrote in a company statement on Wednesday. The ‘damper’ Sechin is referring to is the term used to describe payments to oil refineries to encourage them to sell domestically rather than export.
Sechin argued that the ministry is “ignoring fundamental changes in the operating conditions of the country’s oil industry” such as new supply routes for Russian oil and new approaches to its pricing.
Rosneft abandoned Brent-linked pricing in April and switched to Dubai quotes in its deal for deliveries of crude oil to India’s top refiner Indian Oil Corp.
The Rosneft head pointed out that the ministry has continued to use the Brent quote, what he called an “irrelevant” price indicator, for taxation, and applies “virtual freight costs for no longer existing routes for the supply of Russian oil to Europe, without taking into account the cost of transport and other logistics costs.”
Russia has been rerouting its energy supplies from traditional markets in Europe to Asia, mainly India and China, after the West imposed sanctions, including an embargo on seaborne crude imports accompanied by price caps on the country’s oil and petroleum products.
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