How our country can use oil and gas revenues correctly
In the comments to my articles on the dependence of our budget on the dollar exchange rate and oil prices, a quite reasonable proposal was repeatedly sounded: "If you criticize, offer!" Indeed, it is so easy to criticize the existing budget processes, but what can be offered in return?
Why MET appeared
In short, after the collapse of the USSR, this is what happened: the state, of its own free will, lost monopoly ownership of oil and gas enterprises. A significant part of the assets passed into private hands, in whole or in part. The same "Gazprom" was corporatized, although the Russian Federation retained a significant part of the block of shares.
However, having allowed private investors to such a "feeding trough", the state, naturally, could not transfer to them the excess profits derived from the processes of oil and gas production and sale. Therefore, in addition to the usual taxes levied on enterprises in the real sector of the economy (VAT, income tax, etc.), our state has introduced special taxes for oil and gas production enterprises - in history we will not get into the question, but now this tax is the mineral extraction tax (MET).
On the one hand, this was correct, because this kind of excess profit is not the merit of the private owner, and in this case the state has not even the right, but the obligation to establish a more stringent tax regime than enterprises in other industries. But on the other hand, it was the MET that laid the foundation for the economic disasters of 2008 and 2014. and has become the strongest deterrent to the development of our economy.
The thing is that the profit of subsoil users depends very much on the cost of oil in international markets and on the ruble against the dollar. Accordingly, willy-nilly, it was necessary to tie the size of the severance tax to these two parameters - perhaps there was no other way out. How is that? The state should have withdrawn exactly the super-profits, and their size will differ from year to year, taking into account world oil prices and the ruble exchange rate. And if, for example, we establish a firm rent from each ton of oil produced in rubles, then at some time when oil is expensive abroad, Gazprom and Co. will swim in money, but when it collapses in price, the company's activities will go to the minus, crushed by the unaffordable tax at the given prices.
Make a 90% income tax for oil and gas companies? The idea seems to be not bad, but you need to understand that in this case, the excess profits of such companies can be spent on internal consumption (say, billions of dollars in salaries, offices made of pure gold, etc.) - and the tax will be paid from a "small share" of the real their profits.
Make a tax that depends on the cost of oil and the dollar, but levied only on oil and gas exported? A sensible idea, but then it is no longer a tax, but a customs duty is obtained, but we were striving for the WTO ...
In other words, in order to establish a fair withdrawal of excess profits from oil and gas companies in favor of the state, it was required to "tie" the calculation of the tax to those parameters on which these profits depend. It was not a bad solution to a specific problem ... But what consequences did it lead to?
Destructive consequences
First, a completely intolerable situation has developed, when the state has been able to patch up holes in both its own budget and the incomes of oil and gas enterprises by depreciating the ruble against the dollar. The mechanism is described in sufficient detail in previous article, there is no point in retelling it. In any somewhat difficult situation, it was enough for our government to simply collapse the ruble, as a result of which protection was provided for both the budget and those who play a very significant role in filling it - oil and gas producers. True, this was achieved at the expense of all other spheres of the economy and the bulk of the population, but who cares about them ... The Government of the Russian Federation is primarily responsible for fulfilling budgetary obligations, but they are asked "insofar as" for the growth rate of our country's economy. In addition, this situation fully satisfies the private shareholders of oil and gas production companies. What else is needed for happiness?
In other words, the severance tax and this kind of “ruble management” created, as it is called, a comfort zone for both the government and the oil industry, in which they feel good and comfortable, since the problems they face have relatively simple solutions. And the fact that this comfort is achieved at the cost of creating huge problems for the rest of the population of the Russian Federation does not really bother them.
The problem is that the large, as it is fashionable to say now, the volatility of the ruble provides our economy with a relatively high inflation, and relatively expensive loans, and an extremely low investment rating - who wants to invest in ruble-denominated production assets in the Russian Federation, the cost of which during of the next collapse of the ruble exchange rate can fall almost twice in dollar terms in the shortest possible time? In other words, as long as we do not give up playing with the ruble exchange rate as a means of patching up budget holes, we do not and will not have any prerequisites for normal economic development and growth.
By the way, my words are perfectly confirmed by statistics - as long as there are no sharp changes in the ruble exchange rate against the dollar, our economy is developing quite well, which, for example, was demonstrated by the 2000-2007 period. Even after 2008, our economy, having received a severe blow, nevertheless gradually restored its positions, only now it was worth restoring - 2014 burst out.
But what about that same Gazprom? According to some reports, in 2019, the average monthly salary of an employee of this oil giant was 110 rubles.
In other words, oil and gas production enterprises have long been transformed into a kind of "state within a state" in which the level of income can be several times higher than the average salary in the region where the enterprise is located. Of course, Gazprom is chic, in accordance with the brilliant statement of a prominent Ukrainian politician - "not only everything" - yes, someone gets very little, and someone's high salaries are more than justified by the harsh natural conditions in which they are earned, but ...
All this was - in the first place. And secondly - the introduction of the severance tax led to another, rather unpleasant consequence. The fact is that this tax is levied on each ton of oil produced, regardless of the complexity, and hence the high cost of production. More precisely, there is an amendment to the tax, but it is scanty. As a result, it became simply unprofitable for oil producers to undertake the development of complex fields - taking into account the need to pay severance tax, they are unprofitable. Thus, now there is a “sampling” of relatively cheap deposits, and no one thinks about what will happen next. After all, there is enough for their lifetime, what is already there.
What to do?
There is a solution to the above problems, and it, in general, lies on the surface.
It must be understood and accepted that such minerals as oil and gas cannot be owned by a private or even a state company. They must become the property of our people, the property of the state. That is, we need to change the very paradigm of the oil and gas complex. Any oil and gas produced on the territory of the Russian Federation, which also refers to the Arctic zones, etc., must be the property of the state.
Accordingly, the enterprises of the oil and gas production complex will cease to own the oil and gas they have produced. They must provide services for the extraction and transportation of oil and gas to the state.
That's all.
What is achieved by this?
At first, there will be a redistribution of income from the oil and gas complex to the state. There will be no more “states within a state” with a cosmic level of average salaries, because the same “Gazprom” and others like it will start working according to a system that most of all resembles military-industrial complex enterprises. That is, they will have to coordinate their expenses with the state (in the military-industrial complex this is done through the institution of military representatives), and they will receive their honest 20% profitability for their own costs and 1% for the services of their contractors.
Secondly, all foreign exchange earnings for the supply of oil and gas abroad will be in the hands of the state and the budget. This should even lead to a worsening of the situation - now the budget will have even more temptation to play with the ruble exchange rate. But it won't, and here's why.
The actions described above will concentrate foreign exchange earnings in the hands of the state, significantly increasing the share of foreign exchange earnings in the federal budget revenues. Accordingly, now even a very small depreciation of the ruble will provide a much higher budget profitability, that is, it will simply not be necessary to collapse the ruble by tens of percent. And besides, it will be impossible to "drop" the ruble exchange rate with impunity. After all, oil and gas producing companies will no longer have foreign exchange earnings, therefore, they will suffer from the depreciation of the ruble, like everyone else. And this will create the risks of their bankruptcy, which will be fraught with a decrease in oil and gas production and a drop in state revenues.
In other words, in the proposed scheme:
1. It will be possible to replenish the budget with much smaller fluctuations in the ruble exchange rate;
2. Government officials will have to think every time whether it is worth using this tool at all, whether it will bankrupt oil and gas production enterprises, because if it goes bankrupt, the budget will collapse, and then the official will be asked for it in full;
3. The owners of oil and gas production enterprises will become the strongest lobbyists against the depreciation of the ruble, because now, when they no longer have foreign exchange earnings, this decline will play against them in exactly the same way as against almost all other Russian businesses.
It was all - secondly. well and third, the state will receive the strongest inflation control levers. It is it that will now sell both oil and gas on the domestic market; it is it that will be able to set and control prices for such a sale. Thus, the state receives additional tools for managing the revenue side of the budget and influencing the economy as a whole.
In other words, today there is only one way to increase ruble revenues to the budget from the mineral extraction tax - by dropping the ruble. And in the proposed system, it will be possible to achieve the same effect with a significantly smaller change in the ruble exchange rate: you can slightly drop the exchange rate, but at the same time slightly raise the sales prices on the domestic market, or, perhaps, simply by printing out a "box" of reserve funds. Because, of course, the “budget rule” cannot be abandoned in the new system of relationships. Its meaning is that only a part of the revenues from oil export sales should go to the budget, and if oil prices are above a certain level, then the “excess” proceeds are set aside in reserve, “for a rainy day” in the reserve fund. But when the price of oil drops sharply, you can print the jug.
Fourthly, subsoil users will have an incentive to develop complex and expensive deposits. After all, the more their costs - the more profit they can earn. Now they will have to be "dragged by the ears" from such fields, but the development of relatively easy oil and gas deposits will become less profitable for them. If the order from the state for oil production is set in tons, then the less costs for a given volume the enterprise incurs, the less profit it will receive. Here, of course, the objection arises that the oil and gas industry will inflate costs out of the blue ... Of course, there will be. But the state has recently learned to work well with such in the implementation of the State Defense Order. There will be some excesses, but the overall situation will improve.
Fifthly, the state will have another opportunity to balance its budget. For example, while oil prices are high, first of all, complex, expensive fields are being developed, which, of course, entails additional costs for paying production companies, but this is covered by high world oil prices. But when these prices fall sharply, then it is possible to "reactivate" production from "light" fields, where the costs are minimal. It is clear that this tool has many limitations, but it will still be.
At sixth, now our oil and gas producers have currency in bulk, so they prefer to buy imported equipment. If their earnings become in rubles, then this will become a driver for the development of relevant industries in the Russian Federation - now, in the long term, it will be profitable to buy from a Russian manufacturer.
The nationalization of oil and gas will lead us to an increase in budgetary funds, stabilization of the ruble exchange rate, create excellent preconditions for reducing inflation, since changes in fuel prices will be much more predictable, and so on and so forth. But…
Dreaming is not harmful
The thing is that the current government will never agree to such fundamental changes. They simply do not need this, because the existing system is more than convenient for it, not to mention the fact that the nationalization of oil and gas will hit the pockets of private owners of oil and gas companies very hard.
Yes, if the authorities decided to do this, these very owners would have to put up with clenched teeth. But the existing hierarchy of power, as mentioned above, is in the comfort zone - after all, in order for the mechanism I have described above to work, you will need to work hard and bear considerable responsibility for the results of your labor. And why do this if their problems are being solved "at once" by a simple collapse of the ruble exchange rate?
One of the axioms of the science of managing people is that a leader should not let his subordinates stagnate in the comfort zone. He must lead them out of this zone so that they could return to it only after having worked hard and achieved their goals. But who will lead the Russian government out of the comfort zone? Alas, today there is no one to do this.
And therefore we are doomed to wander into nowhere - this is the direction in which today's economic policy of our state is leading us.
But if so, why are we talking about it?
"Then why are you writing all this, the author ?!" - the reader may ask a question. I answer. I strive to tell and show that the "world order" existing in the Russian Federation is not a dogma, it is not ideal and can be changed for the better. If our society wakes up, if it is imbued with the corresponding ideas, then sooner or later one economic law will work, which has proved its inviolability over many centuries of human existence. It sounds like this:
Demand creates supply
Simply put, if society wants something, sooner or later a political force will appear that wants to satisfy these desires. It is quite possible that it is by no means out of good intentions, but out of self-serving reasons - to provide oneself with the support of the electorate, for example. But is it really that important in the end?
Today, alas, there is no such force. The Communist Party of the Russian Federation is completely exhausted, the Liberal Democratic Party, despite the biting remarks of the once young Zhirinovsky, has never been an opposition party, but it is absolutely impossible to talk about Navalny and his ilk seriously as politicians. Their level is small-town rallies, they are incapable of anything more. Give such people power - and at best they will scatter in horror from the responsibility that has fallen on them. In the worst case, they will try to steer and thus destroy the state.
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