April 21, 2011 / 3:22 PM / 9 years ago

UPDATE 1-Russia finance, energy chiefs in open spat on tax

* No export fee breaks for Vankor starting from May

* Russia to elect president in March 2012

* Fight between different camps intensifies

* Sechin stripped of chair on Rosneft board

(Changes headline, releads, adds details)

By Darya Korsunskaya

MOSCOW, April 21 (Reuters) - Russia’s finance ministry and a top energy official clashed openly in front of Prime Minister Vladimir Putin on Thursday over oilfield tax breaks, highlighting policy faultlines before 2012 presidential polls.

During a business organisation’s meeting at government headquarters, Putin asked if the major Vankor oilfield, controlled by state-owned company Rosneft (ROSN.MM), would be stripped of a beneficial tax regime.

Deputy Finance Minister Sergei Shatalov said it would, while Putin’s aide and deputy Igor Sechin then contradicted him, saying the export duty breaks were only being suspended, not axed.

With presidential election in March 2012 fast approaching, rivalry for the Kremlin keys is getting more conspicuous.

Putin, who is seen by most Russians as the paramount leader, and his protege, President Dmitry Medvedev, have recently set the tone for the election campaign by stressing different priorities in domestic and external politics.

They have not yet said they will challenge each other in the race, however.

The new Vankor oilfield in the Arctic north, set to pump 15 million tonnes this year, has been a key driver behind Russia’s high oil production, now the world’s biggest.

But officials have decided to remove its duty breaks, starting from May as crude prices have shot to their highest since 2008. Analysts estimate an extension of the duty exemption for Vankor would have saved Rosneft $3 billion a year.

At the meeting Sechin stepped in to contradict Shatalov.

“Vladimir Vladimirovich, we didn’t cancel it, it’s just we don’t apply it at a time of high oil prices,” Sechin told Putin, who chuckled and praised the difference of views without favouring one side or the other.

“You see, how different the opinions are in our government. In fact, it’s good, it speaks volumes that in government there are always people who speak the same language as you,” he told the businessmen at the meeting of the Russian Union of Industrialists and Entrepreneurs (RSPP).

Putin has to sign the tax break move before it takes effect.

The exchanges showed tensions are high over tax policy on the oil industry, which says it cannot keep pumping at current near-record rates, much less launch new fields, without tax breaks.

On the other side the Finance Ministry, led by the hawkish Alexei Kudrin, has said it might redistribute but not cut the levies on energy that make up more than 40 percent of the budget.

Earlier this month Sechin, seen as staunch Putin ally, stepped down as Rosneft chairman after Medvedev ordered the government officials to quit from boards of state-controlled companies.

The move was seen by some analysts as a sign of Medvedev’s efforts to strengthen his grip on power before the election.

Sechin’s clout has also been weakened by the gatecrashing of a $16 billion share swap deal and Arctic development agreement between Rosneft and BP (BP.L) by the British company’s oligarch partners in the Russian TNK-BP TNBP.MM venture.

Reporting by Darya Korsunskaya; writing by Vladimir Soldatkin; editing by Melissa Akin and Anthony Barker

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