Gazprom Neft asked to finalize the taxation of service agreements

As Gazprom Neft CEO Alexander Dyukov noted in his letter, the finalization of the SSR will allow investors from “friendly” countries to participate in oil and gas projects in Russia without the threat of secondary sanctions

“Gazprom Neft” proposed to work out the tax parameters of income under service risk agreements (SRR), which can allow investors from “friendly” countries to participate in oil and gas projects in Russia without the threat of secondary sanctions. Reported by “Kommersant” with reference to the appeal of the general director of the oil company Alexander Dyukov to Deputy Prime Minister Alexander Novak.

The agreements adopted under Federal Law 75 of April 12 this year allow attracting Chinese, Indian and Arab investors without transferring shares and creating common property for the development of oil and gas fields. These terms of the agreements are “particularly relevant in the context of sanctions,” Dyukov's letter notes.

According to the document, in contrast to the joint venture, the SSR assumes that the license and control over the assets of the Russian subsoil user will be retained. In the event that the financing party refuses to cooperate due to sanctions or the futility of development, the Russian party will not be obliged to return the investment. Thanks to this, there are no threats of secondary sanctions for foreign investors, the parties' shares in income and expenses are open for flexible adjustment, and any difficulties in the procedure for entering and exiting agreements are excluded, the oil company said.

At the same time, Dyukov’s letter states that the rules for taxing the activities of simple partnerships cannot be applied to income under these agreements due to the “risk nature”, the absence of common property when making common expenses and the possibility of distributing income between participants in a different ratio than expenses . Thus, if by the end of the spring session of the State Duma the proposed by Gazprom Neft changes to the Tax Code will not be approved by the government, the SSR will lose its investment attractiveness.

In the Ministry of Finance, at the request of Kommersant; they replied that they were considering proposals to amend the tax legislation.

Gazprom Neft, like other major Russian oil companies, came under EU sanctions in mid-March. Transactions and transactions with them in the EU jurisdiction are prohibited due to the fact that these structures are controlled by the state.

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In early June, Brussels imposed a sixth round of sanctions against Russia, which also included a partial oil embargo. The ban includes the supply of raw materials by sea, and countries dependent on Russian oil imports will continue to receive it through the Druzhba pipeline. The United States imposed an embargo on oil and gas supplies from Russia on March 8. The next day, gasoline prices in the country overcame an all-time high and exceeded $4.17 per gallon. Great Britain and Canada also refused Russian oil.

On June 7, US Treasury Secretary Janet Yellen said that Washington and allies are discussing how to keep the flow of oil from Russia to the world market, as this will contain rising fuel prices, but at the same time they want to limit Moscow's profit from exports. The Washington Post previously wrote that the White House is exploring the possibility of imposing sanctions against third parties in other states due to the unclear impact on the Russian economy of existing restrictions.

Russian Foreign Minister Sergey Lavrov called Western sanctions illegal and ruled out losses to the Russian budget due to restrictions on Russian oil supplies. According to him, oil markets do not obey political “orders”, and Moscow has alternatives to the European market, where it is increasing supplies. According to Deputy Prime Minister Alexander Novak, in the event of a ban, world oil prices could jump to $300 per barrel.

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