According to Vedomosti and RBC Daily, President Vladimir Putin has asked that the previously approved plan for excise taxes on gasoline and diesel be reconsidered. Particularly, Euro-5 gasoline and diesel excises might increase more than planned, while excise rates for Euro-4 fuels might increase less sharply. Overall, excise increases would be higher than the planned 6%, RBC Daily speculated.
We reiterate our view that the initiative to reconsider excise taxes is negative for the Russian investment climate, as it undermines the industry’s trust in the sustainability of the government’s previously announced regulations. The differentiation of rates between Euro-4 and Euro-5 fuels was intended to create incentives for Russian oil companies to invest in quality upgrades. Now these incentives might be distorted, and the profitability of investments in upgrades that the companies have already made would have to be reassessed.
Dmitry Loukashov, CFA Alexander Kirevnin Ekaterina Rodina, Elena Kopylova Mikhail Zarkhi
VTB Capital analyst
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