| |
Russia's oligarchs shiver
again
By John Helmer
MOSCOW -
While a proposal to raise mineral taxes, aired in Moscow
last week, has taken parliamentarians by surprise,
industry sources have interpreted it as an indicator
that President Vladimir Putin's current campaign against
oil company Yukos may be extended, after the upcoming
parliamentary and presidential elections, to other
mining companies.
Two in particular are Norilsk
Nickel, the world nickel leader, and Russian Aluminum
(Rusal), the number-two global producer of aluminum. As
Asian importers, particularly China, are major buyers of
these Russian metals, a change in the Russian tax
treatment is likely to affect Russian metal export
prices.
Vladimir Vonukevich, a tax expert on the
staff of the Duma Committee on Budget and Taxes, told
Asia Times Online that without committee approval and a
vote by the Duma, "it is not possible to approve tax
changes." Speaking through an assistant, committee
chairman Alexander Zhukov said he had not heard of the
proposed new tax change, and could not comment.
Andrei Fyodorov, head of the Tax Ministry's
department for payments from resource and mining
companies, was reported by a Moscow newspaper early in
the week as saying his ministry is considering a change
in the law that would link tax payments on minerals such
as nickel, aluminum, copper, and platinum group metals,
to their international market price.
The
proposal suggested that mineral producers like Norilsk
Nickel, Ural Mining and Metallurgical Combine (a copper
specialist), Rusal, and Siberian Ural Aluminum (SUAL)
would no longer be taxed at 8 percent on the domestic
price of the metals they produce. The ministry proposal
suggests bringing minerals taxes in line with crude oil
taxes, which are based on the international price,
calculated each quarter, for Urals blend, the Russian
export benchmark for crude.
Mikhail Yumaev,
Fyodorov's deputy at the Tax Ministry, confirmed the
existence of the proposal, but told Asia Times Online
"it's now only an idea and a proposal developed by the
Ministry of Taxes. There is no draft of legislation for
the Duma tax committee, which knows nothing about it
yet." Before a ministry proposal can go to the Duma, it
must also be circulated to other government ministries
and gain the approval of the prime ministry and the
Kremlin.
Mikhail Zadornov, a former government
minister of finance and currently senior member of the
Budget and Taxes Committee, was also taken by surprise,
an assistant told Asia Times Online, and would not
comment. Yevgeny Marchenko, a senior Communist Party
deputy on the Duma committee, acknowledged through a
spokesman that he was in the dark about the tax hike
idea.
The timing of the proposal has attracted
attention because of the public clash between President
Putin and the Yukos oil company, whose executives have
been charged with tax evasion and other alleged crimes.
Ministers loyal to Putin, including the Finance Minister
Alexei Kudrin, and the Economic Development and Trade
Minister German Gref, have made public statements in
recent days suggesting that the major oil and mineral
producing companies should be subject to new and higher
levels of tax.
Industry analysts also speculate
that the government's attack on Yukos could spread to
other companies controlled by Russia's so-called
oligarchs, who acquired their controlling stakes in
controversial privatization deals in the mid-1990s. An
attempt by the Finance Ministry to raise the tax take
from the two Russian aluminum producers, Rusal and SUAL,
by canceling tax-free tolling, was abandoned several
weeks ago, after intense industry lobbying.
Although Duma elections are scheduled for less
than a month away, not one of the deputies interviewed
suggested his backing for the higher tax treatment of
the oligarch-led companies.
Just over a year
ago, another, similar surprise was dropped on the
Russian mining and extraction industries. This took the
form of a proposal from a senior Kremlin official to
reclaim state ownership of reserves and resources, and
introduce a concession system.
At that time, the
idea came from Dmitri Kozak, then a senior staff man in
the presidential administration. On behalf of a study
group, he forwarded a paper to the government for
ministerial review, briefly describing the proposal in
televised remarks.
Mining legislation in South
Africa, Australia, and Canada, Kozak intimated in last
year's white paper, had been studied closely by the
Russian academics who had prepared the recommendations
for the policy change. Putin himself also studied
foreign mining legislation as part of his doctoral
studies in St Petersburg several years ago. Putin was
widely believed to be backing the new scheme to modify
the Russian law so that mineral resources would remain
the property of the state until sold, with mining and
producing companies granted concessions by the state on
a cost-plus basis.
The existing law provides
that subsoil resources belong to the state, which grants
licenses for their exploitation by competitive tenders.
The federal and regional governments share control of
the licensing system, while they, and local governments,
tax the proceeds of mining. Once licensed, the resources
extracted are the property of the companies that produce
them.
There was immediate opposition to the
Kozak proposal from the Russian oil and mining
companies. "Replacement of the licensing mechanism with
concessions will have a disastrous effect for the mining
industry in Russia as a whole," said Valery Braiko,
president of the Russian Gold Producers Association. He
said at the time that "to introduce state ownership of
not only subsoil, but also of the natural resources
which are extracted, is in contradiction to Article 9 of
the constitution and other laws, such as the Civil
Code."
According to Alexei Moiseyev, an analyst
with Renaissance Capital, a Moscow investment bank, the
new policy "is being pushed by the St Petersburg group
that consists of personal allies of the president from
his home town, and former KGB colleagues." He termed the
idea "economically irrational".
One of the
strongest domestic critics of the existing license
system for miners and oil and gas producers is Vladimir
Litvinenko, director of the St Petersburg Mining
Institute. He is an advisor to Putin, and supervised
Putin's doctoral work. Litvinenko has told Asia Times
Online in the past that he favors bringing Russian
resource policy into closer alignment with international
standards, and tougher implementation of their
use-or-lose requirements.
Sergei Aleksashenko,
vice-president of Interros, the controlling shareholder
of Norilsk Nickel, Russia's leading miner, told Asia
Times Online, "Technically, it will be extremely
difficult to implement such a law, but if the state sets
such an aim for itself, it can be done. But I doubt very
much that the state would gain anything from replacing
licenses with concession agreements. Adoption of such a
law will have disastrous consequences for the Russian
stock market and will make the future of [mining and
extraction] companies absolutely uncertain. I don't
think the state will be able to increase its revenues
from rent payments for the use of subsoil in such a way
either."
Oil industry sources claimed the
proposed concession scheme was a form of political
blackmail. Within weeks, they forced Kozak to retract
his initiative, and the proposal was abandoned without
formal cabinet review.
What happened to Kozak's
proposal a year ago is of especial significance today,
because Kozak has risen in the Kremlin hierarchy since
October 30, when Alexander Voloshin lost his job as the
president's chief of staff. Voloshin had been a
supporter of the oil and mining oligarchs. Kozak is now
deputy to the new chief of staff, Dmitri Medvedev.
(Copyright 2003 Asia Times Online Co, Ltd. All
rights reserved. Please contact content@atimes.com for
information on our sales and syndication policies.)
|
| |
|
(Jul 16, '03)
|
|
 |
|
