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This content was produced in Russia where the law
restricts
coverage of Russian military operations in Ukraine
MOSCOW, Feb 14 (Reuters) - The Russian government's move to tax oil producers based on benchmark Brent crude will still leave substantial earnings for oil producers, while not being significant in narrowing the budget deficit, analysts said on Tuesday. The government has been debating how to calculate Russia's taxable oil price since Western sanctions drove down the price of the currently used Urals benchmark, a crucial issue given Moscow relies on oil and gas income to fund its budget. Russia has been forced to start selling foreign currency reserves to cover a deficit that stretched to 1.76 trillion roubles ($24 billion) in January to cover the cost of what it calls the "special military operation" in Ukraine.
Under last week's draft proposals, the discount for Russian Urals oil to dated Brent will be limited to $34 per barrel in April, declining to $31 in May, $28 in June and $25 in July. But in tax-raising terms the measure may have a limited impact. "The discount of $34 per barrel is very generous and corresponds to the actual discount at which Russian oil is traded in early February," analysts at SberCIB Investment Research said.
"A reduction in the oil discount for tax purposes will not have a significant negative impact on the profitability of companies in the sector in the medium term." Urals crude differentials remained sharply below the single-digit discounts seen in early 2022. According to preliminary data, Russia's oil and gas revenues were 46.4% lower at 426 billion roubles in January than in the same month last year, which the finance ministry put down primarily to lower prices for Russia's Urals blend and lower volumes of natural gas exports. Overall, budget revenues for the month were down 35.1%, while spending was 58.7% higher in January 2023, at 3.12 trillion roubles, already more than 10% of the full-year spending plan. "The decision is positive from the point of view of increasing the stability of the federal budget, but its effect until the end of this year does not look decisive," Rosbank analysts said. They added that according to their rough estimates, the revenue benefit for the Finance Ministry is unlikely to exceed 0.5 trillion roubles, compared with a January budget deficit of 1.8 trillion and a planned deficit for the whole year of 2.9 trillion. A source at the finance ministry said the government probably took into account an increase in oil prices when drafting the bill. "If our price forecasts for 2023 come to pass (Brent - $100/bbl on average, Urals - $75/bbl), then the amendments will not have any impact on the taxation of oil companies at all," Sinara bank analysts said. (Reporting by Vladimir Soldatkin, Darya Korsunskaya and Olesya Atsakhova; Editing by David Holmes)
@vsoldatkin;))