Putin Accuses Oil Firms of Price 'Conspiracy'

Reuters

Russian Prime Minister Vladimir Putin accused oil companies on Thursday of a "conspiracy" to force up gasoline prices, as the world's largest oil producer struggles to combat fuel shortages.

Putin rebuked Deputy Prime Minister Igor Sechin, his point man for energy, for suggesting at a government meeting that price rises had resulted from a lack of oil products offered for sale on commodities exchanges.

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"It's not a shortage. This is not about a shortage. This is a conspiracy. They are colluding," Putin told Sechin, who serves on the board of state-controlled oil major Rosneft and is widely seen as the chief spokesman for the industry.

The government last week raised gasoline export duties by 44 percent to keep fuel in the domestic market after pumps ran dry in some regions and shortages spread to Moscow and St Petersburg.

Sechin has chaired talks to discuss proposed amendments to oil tax reforms that would ramp up export duties on refined products to punitive levels if crude oil prices are high.

Analysts blame the shortages on price curbs demanded by Putin from industry bosses in February, and a lack of investment in the refinery capacity needed to produce the premium fuel used by Russia's growing fleet of modern cars.

Fuel prices are the latest driver of inflation that is close to double digits. Gasoline prices rose by 2.8 percent last week, their biggest jump in 14 weeks, data showed on Thursday.

The central bank hiked interest rates last Friday to contain inflation, which will be key for sentiment ahead of elections to parliament in December and a presidential poll next March.

Putin has not ruled out returning to the presidency, and the viability of any candidacy will depend on his handling of the economy. President Dmitry Medvedev, the other wheel in Russia's ruling "tandem," may also seek a second term.

Sechin's talks with officials discussed emergency measures such as increased trading of oil products on official exchanges and intervention sales of gasoline from strategic reserves.

One goverment source familiar with the talks said, however, that such intervention sales would be difficult to carry out in short order from a legal point of view.

Sechin did not clarify what measures he would back, but said possible additional measures would be focused on crude oil.Russia's government sets monthly export schedules for oil firms from major ports and therefore has the ability to limit shipments, a measure that could unsettle oil markets at a time of high global prices.

Russia produces over 10 million barrels per day (bpd) of crude, of which 4 million bpd is refined. Around half of the refined products are exported, mainly to Europe.

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Russia's government has been tightening the screws on the oil sector, which generates the lion's share of state revenue, to rein in the budget deficit and fund pre-election spending helped by oil prices' rise to a 2 1/2 year high.

It has from this month cancelled preferential export duties for Rosneft's Vankor oilfield as well as for TNK-BP's Verkhnechonskoye and Surgutneftegaz's Talakan. Some analysts had expected that the government might ease pressure on the sector by cutting taxes on crude production but Deputy Finance Minister Sergei Shatalov said he saw "no reason to do this."

Thursday's meeting considered faster implementation of an Energy Ministry proposal to lighten the tax burden on crude oil exports and equalise export duties on products.

The so-called "60/66" proposal would lower a coefficient that determines crude oil export duty to 60 from 65 now, while equalising the export duty applying to light products at 66 percent of the crude oil export duty.

High oil prices have, however, complicated the maths on the proposals, which had been due to take effect in July.

The Vedomosti daily reported that one proposal on the table would lower the crude oil export duty coefficient to 55 and hike the factor applying to refined products to 86 percent if the oil price exceeds $90 per barrel.

"60/66 only works with the price at $90-$95 per barrel... With $100 it doesn't work at all," Deputy Energy Minister Sergei Kudryashov told reporters.