Privatization of Profits, Nationalization of Losses: moscow Is Rescuing “rosneft” Again

The government of the rf has resumed discussions on the construction of the eastern petrochemical company (epc) – a large-scale oil refining complex near the port of nakhodka in the primorsk territory with an estimated cost of $19.5 billion. The project, which “rosneft” itself abandoned in 2019 as economically unviable, may now be revived, but not at the company’s expense.

The complex is designed to process 12 million tons of oil and produce 3.5 million tons of petrochemical products per year. It requires 2.3 billion cubic meters of natural gas per year to operate. The official reason for returning to the topic is the fuel shortage in the far east. The unofficial reason is the interests of igor sechin, the head of “Rosneft” and one of putin’s closest associates.

The key question is who will pay. Among the support mechanisms being considered is an increased reverse excise tax on oil for far eastern projects: a scheme whereby the state effectively returns part of the taxes paid to the company, compensating for production costs. In other words, direct subsidization of a private project from the federal budget.

The cynicism of the situation cannot be overstated. “rosneft” itself recognized the project as unprofitable and removed it from its investment plan. Now the same company is returning to it, but with its hand outstretched to the state. In the context of a record budget deficit, which moscow is patching up with the national wealth fund and new borrowings, such a scheme looks like a redistribution of public resources in favor of businesses close to the kremlin.

The final investment decision has not yet been made – the parties are agreeing on the parameters of state support. But the very fact of the negotiations speaks volumes: without guaranteed budget injections, the project will not survive. And the stability of any tax breaks in an economy operating in wartime mode is highly questionable.