Increasing export mineral duties: Pros and Contras

With its Resolution of March 29, 2010, № 187, the RF Government increased export duties on oil and oil products effective as of April 1, 2010.


More specifically, the export duty on crude oil now is USD 268.9/t, light oil products – USD 193.5/t, black ones – 104.2/t vs. the previous USD 253.6, 183.2 and 98.7, respectively. In contrast, the duty on LNG was decreased from USD 80/t to 65/t.  

The next day after signing of the Resolution, which introduced the aforementioned amendments to Resolution № 695 “On approving rates of export customs duties on crude oil and individual categories of goods produced from oil”, an initiative was voiced to revise export duties on minerals, mineral fertilizers, and non-ferrous metals. Mr. A. Likhachev, director of the department of analysis and regulation of foreign economic activity of the RF Ministry of Economic Development, informed that the Ministry was developing the respective initiatives on the government’s request.

It is worth noting in this connection that assigned under the RF Government’s mandate in compliance with Art. 3 of the act "On customs tariff regulation of export mineral duties", the regulation of export customs duties can, under certain circumstances, grow into an efficient lever of regulation of the national economy’s development vector.

In the first decade of the 21st century, there had been created and developed a mighty mineral production and export infrastructure. It secured the nation’s leading global position across a string of the sectoral indicators. Judging the official rhetoric, even representatives of the RF Government have lately come to appreciate the fact that this kind of leadership is disputable so far as the long-term development objectives are concerned. Recently the need to develop the national processing sector has already been discussed vigorously. 

An increase in export duties on minerals in tandem with tax and other incentive measures for the processing sector might form a civilized and efficient encouragement mechanism for the processing industries. It can ensure the situation in which exportation of resources would become less lucrative than their supplying for the domestic processing. Meanwhile, extra revenues the budget will in any case receive from such an increase of export mineral duties could compensate, at least partially, for costs of filliping the development of the processing sector. If combined, all the moves would give hope for a consistent advancement of Russia’s economy in the long run. 

In contrast, the employment of export mineral duties just as a means of an urgent financial boosting of budget expenditures without regard to the processing sector’s interests can already in the short run grow into a cause for the fall of the economy’s competitiveness even in the area of mineral supplies. Such a scenario makes already winterly prospects of Russian economy’s competitiveness in the 21st century yet more pessimistic. Regretfully, in the context of the RF Government’s economic policy over the past decade, it is the latter approach to the customs duty regulation that seems more likely, particularly given that since April 2010 one has not been able to discuss a radical increase of export mineral duties.

D. Kazantsev, Senior Analyst Lawyer of the Department of Evaluation and Development of Legal Acts