What you need to know about duties on Russian oil products
Oleg Gez, Acting Chairman of the Executive Board, PJSC Ukrnafta
What happens to the prices
Increasing prices for oil products in Ukraine as a result of the introduction of a duty on Russian diesel fuel and autogas is a myth. After all, the prices at filling stations depend on oil prices, excise taxes and the dollar rate. The current price situation on the oil markets does not give any grounds to speak about growth.
In August 2019, the government introduced a special duty of 3.75% on the import of pipeline Russian diesel. At that time, some importers, hired experts and their allies also spoke about the threat of increasing prices. However, the price of diesel fuel at filling stations has since fallen by 25%. Mainly due to the fall in oil prices.
Thus, after the introduction of special duties, importers of Russian fuel may lose about 40 kopecks per liter of diesel fuel. However, in the retail market the price growth will be restrained by competition between national producers and importers.
The state budget of Ukraine will only benefit from the introduction of duties. Additional revenues may amount to 2.7 to 4 billion UAH per year, depending on the dynamics of prices and volume of imports. Representatives of the Russian fuel importers say that the Ukrainian market is premium for Russian oil producers. It is clear that Russian companies are interested in maintaining the status quo and earning extra profits in the Ukrainian market. However, the Ukrainian government should act in the interests of Ukraine and its citizens and send premium earnings of Russian oil workers to the Ukrainian budget.
Energy dependence / independence
The experience of the Russian-Ukrainian gas wars teaches us that Russia uses energy carriers as a means of pressure and influence. Diversifying gas supplies and refusing to import gas directly from Russia has knocked these weapons out of its hands.
The situation with oil products is the opposite: 80% of oil products are imported, with about 38% coming from the Russian Federation. What can it lead to? In April 2019, the Russian government banned the export of bitumen to Ukraine. As a result, there is a deficit and increasing prices. At the end of 2019, the Russian government restricted oil supplies to Belarusian refineries, from which one third of the gasoline comes to the Ukrainian market. Consequently, there is a shortage and price hikes in Ukraine.
It is no less reckless to feed such dependence on the Russian Federation with your own hands. Import duty is an effective tool of diversification, which allows moving towards this goal without shocks for the economy and consumers. For now, Ukraine has time and opportunity to reduce its dependence on Russian oil products in a controlled manner and on its own terms. If Russia uses its oil weapons, we will no longer have time and room for maneuver.