Russia Subsidies

Russia–$14.4 billion in 2010

Generally, the federal government’s fossil fuel subsidies in Russia are complex and not transparent. Five years ago, an extensive research report “Government subsidies to oil and gas: at what costs?” was published with support of WWF and International Institute of Sustainable Development. This research summarized the possible subsidies schemes for oil and gas industries in Russia.

This research identified 30 schemes for granting subsidies to oil and gas producers in Russia at the federal level. These schemes included: direct support (state targeted financing, state loans on preferential terms, etc.), and indirect support—for example, the state’s acceptance of liability for compensation for damage as a result of accidents or the provision of public infrastructure facilities on preferential terms.

The study quantified 17 subsidy systems which amounted to a total of $8.1 billion in 2009 and to $14.4 billion in 2010. The ten largest federal subsidies for oil and gas production in Russia were as follows:

• Temporary benefits for export customs duty for oil produced on new deposits of Eastern Siberia (approximately $4 billion);
• Tax holidays for the mining tax for new deposits of Eastern Siberia (approximately
$2 billion);
• Exemption from property tax for main oil and gas pipelines (approximately $1.9 billion);
• Tax holidays for mining tax for new oil fields in the territory of Nenets Autonomous Okrug and on the Yamal Peninsula in the Yamal-Nenets Autonomous District (approximately $1.5 billion);
• Subsidized tariff for transportation of oil through the Eastern Pipeline System Siberia – Pacific Ocean (approximately $1.1 billion);
• Lowering coefficient to the rate of mining tax for oil of depleted deposits (approximately $1 billion);
• Temporary exemption from export customs duty for gas exported to Turkey through the Blue Stream pipeline (approximately $0.8 billion);
• Accounting for exploration costs and R & D for the purpose of calculating income tax (at least
$0.6 billion);
• Accelerated depreciation charges (at least $ 0.6 billion);
• State financing of geological exploration for hydrocarbon raw materials ($284 million).

For the moment, no significant actions regarding reducing governmental subsidies to fossil fuels has been implemented. The problem that goes along with significant subsidies to fossil fuels is that it affects tariffs, lowering them and making, for example, renewable energy development not profitable.

After discovering these aspects of the government paying subsidies, it appears to me that this issue raises more questions than answers.