30 May.2019

The Damping Mechanism Is Malfunctioning / Comments Made by Ivan Khomutov on the TV Channel Russia 24

In a programme broadcast by television channel Russia 24, dedicated to the increasing tensions in Russia’s fuel market and, in particular, to the growth in the stock market prices for gasoline, Ivan Khomutov was asked to comment on the effectiveness of the damping mechanism currently operating in Russia and designed to curb rising fuel prices.

In response, Ivan Khomutov pointed out that the damping mechanism developed in 2018 and put into operation on January 1, 2019, was less than perfect. In his capacity as petroleum market expert, Ivan Khomutov explained that the damping mechanism involves payment to the refineries of a set amount of funds from the state budget, as compensation for profits lost from the supply of motor fuels to the domestic market. But, according to Ivan Khomutov, the “damper” was negative in January and February 2019. This meant that, at the beginning of the year, not only were those losses incurred by companies supplying gasoline to the domestic market not being compensated by the state, they were actually increasing, due to the need to make payments to the budget for each ton of fuel sold in Russia.

For more details on the specifics of the damping mechanism, please see Petromarket RG’s study «Tax Manoeuvre Completion: What Consequences Should We Expect?».