Russia’s government has proposed a bill that aims to regulate discounts on its oil exports.
The draft proposal, introduced in the country’s State Duma, sets the discount on dated Brent oil at $34 per barrel in April, gradually declining to $25 per barrel by July.
The move comes as the government debates how to determine the taxable price of its oil in the wake of the European Union’s import ban and the absence of a reliable price-setting mechanism.
Currently, Russia uses Urals price assessments in European ports to calculate its taxes and duties. The government is planning to fix the price of Urals crude oil at $20 below dated Brent for tax purposes.
Oil and gas play a crucial role in financing Russia’s budget, however, the country has been facing a deficit and has had to resort to selling its foreign currency reserves.
The situation was exacerbated by the military operation in Ukraine, which has added to the budget shortfall. Urals crude has been trading below its benchmark, with discounts slipping to minus $30 per barrel in December.
In response to price caps imposed by the West, Russia announced plans to reduce its oil production by 5% in March.
