* EconMin could hike duty to 90 pct of the fee on crude oil
* The fee could be increased to $414.6/T from $271.4/T in
* Existing plans foresee equal fuel oil and crude oil fee by
* Russia exports 55 million tonnes of fuel oil annually
By Olesya Astakhova and Vladimir Soldatkin
MOSCOW, March 15 Russia's Economy Ministry
has proposed to increase the fuel oil export duty to 90 percent
of the fee on crude oil from 66 percent from April or May, a
move to help solve a burgeoning budget deficit, a deputy
minister told Reuters on Thursday.
Alexey Likhachyov confirmed earlier reports from government
sources that the ministry had proposed the hikes.
"If the authorities agree on the decision, it would be
enforced in May," he said, adding that the ministry wants to
"restore justice" and tax fuel oil with the same rate as
gasoline and naphtha.
But industry watchers cried foul, saying the fee increase
would wipe out refiners' margins. Export duties and the mineral
extraction tax are the major components of the country's
taxation of the oil sector.
If the increase is implemented as early as April, the fuel
oil export duty would jump to $414.6 per tonne from $271.4 per
tonne in March.
Russia exports 55 million tonnes of the product a year.
"It (the rise) may happen as early as April," a government
source said, adding the Economy Ministry believed the current
tax has failed to generate the expected budget revenues.
"Our minister proposed to hike the fee due to the market
situation, including the rise in oil prices," another source at
the Economy Ministry said.
"Looks like the increase will come into force starting from
May, not next month," the source added.
The proposal to increase the tax came after Russia's budget
deficit spiked in January-February to 245.3 billion roubles
($8.3 billion), following a boost in spending in the run-up to
the March election that returned Vladimir Putin to the
The deficit amounted to 3 percent of gross domestic
product, compared with an expected 1.5 percent for the whole of
2012. Economists have warned the pre-election spending surge
could fuel inflation and complicate the government's efforts to
lower its dependence on high oil prices.
Traders say the proposed increases may lead to a collapse in
Russia's refining industry.
"If they introduce a new duty on fuel, this would be a
stranglehold on the refining sector instead of promised
reforms," said a source at a Russian refinery.
Last October, Russia introduced a new crude oil and oil
product export duty regime - dubbed "60/66" because it cut the
crude duty to 60 percent and set most oil product duties at 66
percent of the duty on crude - in order to boost production of
oil and high-grade refined products.
The export fee for gasoline and naphtha was already set at
90 percent of crude oil duty from last May, when the government
wanted to tackle fuel shortages on the domestic market.
It had been envisaged that crude oil and fuel oil would be
subject to equal export duty by 2015.
According to calculations of IFD Kapital analyst Vitaly
Kryukov, with the export fuel oil duty rise to 90 percent, the
current average refining margin of $15 per barrel would shrink
"This would put paid to the investments into refining and
plans to modernise plants, which eventually would hit the state
itself," he said.