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Parliament passes law on new gas MET and motor fuels excise rates for 2013-15


According to Interfax, the Russian Parliament has passed the laws on the new gas and condensate MET rates, as well as the new excise tax rates, for 2013–2015, at the third reading.

We are reiterating our view that an increase in excise taxes is negative for the Russian investment climate as it undermines the industry’s trust in the sustainability of government promises and the regulations which are already in place. The difference between the Euro-4/5 and Euro-3 motor fuel excise rates was the primary incentive for oil companies to invest in quality upgrades. Now, when this difference narrows, the profitability of investments (most of which have already passed the point of no return) will have to be reassessed.

We do not believe that the government will allow oil companies to pass the increase in excises on to final customers and so expect oil companies’ financials to take the main burden.

As for the gas MET, the rates are in line with the announcement by the Ministry of Finance on 20 September and significantly lower than the government’s initial suggestions in May.

Overall, we see the newsflow as mostly priced in by the market, as all the numbers are in line with the previous announcements.

Dmitry Loukashov, Alexander Kirevnin, Ekaterina Rodina, Elena Kopylova, Mikhail Zarkhi
VTB Capital analyst

gas, oil

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