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Bargaining over minerals production tax and gas tariffs

The finance ministry and the economic development ministry have suggested new initiatives in their long-lasting dispute with Gazprom about the pace of growth in the gas production tax and gas tariffs on the Russian market. Elvira Nabiullina’s ministry submitted to the government proposals on increasing tariffs of natural monopolies in 2012 to 2014 stipulating a possibility of their rise at the pace above inflation. Previously Vladimir Putin personally demanded to limit such growth to the inflation level, although later he admitted he did not dare to fix this decision officially. The economic development ministry proposes to introduce a two-stage rise in gas tariffs – from January 1, 2012 the prices are to add 5%, from April 1 they are to advance by 9.5%. Total annual growth (December 2011 against December 2012) in gas prices will be 15%, but due to the two-phase increase scheme the average annual prices of Gazprom will step up by just 12.5%. This is below the 15% level agreed several months ago before Putin voiced his idea to limit growth in tariffs by the inflation rate.

The sanction to raise tariffs will mean compensation for growth in the gas production tax for Gazprom. Another way to reduce or offset the gas production tax advance is abolishing the tax-free scheme of gas exports to Turkey through Blue Stream. This variant is supported by Alexey Kudrin’s ministry. In this case the gas production tax for Gazprom will be set at 431 rubles in 2012. The gas giant may try to put these expenses (30% export duties) onto the consumer (Turkey) but objectively speaking there are few chances to do that. Moscow is currently trying to gain Ankara’s consent to lay South Stream pipes in Turkey’s exclusive economic zone in the Black Sea. So, Gazprom is likely to compensate advance in the gas production tax by raising prices for domestic consumers.

Stanislav Mitrakhovich, NESF leading expert

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