In the fuel market of Ukraine, a scandal because of the fees

The scandal erupted around the possible introduction of protective duties on diesel fuel and liquefied gas imported to the Ukrainian market of Russia. Their opposition has already expressed how the participants of the fuel market, and representatives of the largest consumers of “diesel”.

На топливном рынке Украины скандал из-за пошлин

If a new duty is introduced, the ordinary Ukrainians are unlikely to be pleased how the rising cost of fueling their cars, and the rising prices of food and manufactured goods because of increase in the cost of the fuel component. By the way, in January the fight against deregulating the market led to a fall in the price of a liter of fuel 2 hryvnia, writes Today.

As reported the press service of the largest producer of oil products in Ukraine – “Ukrtatnafta” – January 21 PJSC “Ukrnafta”, JSC “Ukrtatnafta” and SC “ukrgazvidobuvannya” asked a joint statement by the economy Ministry on the fact of anticompetitive actions in the supply to Ukraine of Russian diesel fuel and liquefied natural gas, calling for the imposition on them of duties. By law, no later than 21 February in the Ministry have to say, they open anti-dumping investigation on the application or not.

The statement noted that the violation of the rules of international trade lies in the fact that in Russia under the scheme of reimbursement from the budget of excise producers to compensate for costs associated with the production and export of petroleum products, which, according to the applicants, is subsidies and violates the rules of the world trade organization (WTO). In the end, the Russian fuel is cheaper than the competition, and is its creeping expansion into the Ukrainian market.

The petitioners argue that the imposition of duties will not lead to shortage of gas and diesel fuel or to higher prices, as domestic production, imports from Belarus, Lithuania, Poland, and marine supplies are competitive.

Experts and members of the oil and gas market, citing last year’s experience of the introduction of Ukraine duties on diesel fuel from Russia, warn that may again step on a rake. We will remind, in the summer of 2019 was imposed 4% duties on deliveries of the Russian Federation “diesel” and liquefied natural gas through the pipeline, eventually the supply of “pipe” has ceased, and prices have risen.

According to the petroleum Association of Ukraine (NAU), the share of Russian imports in the second half of 2019 has decreased to 28% compared with 44% in the first half. The share of Ukrainian producers have remained at around 11%, the same as in 2017-2018. That is, the volume of sales of our refineries has not increased, but due to the rising prices its profit increased. For first fuel has risen for all foreign exporters, then our manufacturers have no relation to the pipeline.

“A similar situation happens in the case of initiatives of the refinery, only the growth will be even more significant, because the proposed tax rate is highly significant — from 8,46%”, — said the head of the NAU Nelya Privalova. – If the decision is taken to impose interim measures during the investigation, it will provoke panic and prices will follow immediately. We’ll lose a balanced market with the trend for a decline in prices that we have today, including the efforts of the government.”

Also at NAU refute the alleged non-competitive price advantages from suppliers of Russian diesel fuel and liquefied gas. According to NAU, the customs price of Russian diesel fuel in 2017-2019 year was above quotations of Russian diesel fuel in the Mediterranean: in 2017 at $ 16/ton in 2018 to $ 22/ton in 2019 to $ 27/ton.

Any restrictions against imports, which will lead to higher prices, made by the heads of industry associations of mining and metallurgical and agricultural systems — the largest industrial consumers of diesel fuel.

The President of Association of enterprises “Ukrmetallurgprom” Alexander Kalenkova, in the case of the introduction of fees, the cost of mining and metallurgical enterprises that consume up to 7% of diesel fuel in the country, only in the first year will grow to 600-700 million.

“The price increase will affect all citizens, we are talking about higher costs for all of about 11 billion UAH. Of these, 600 to 700 million UAH will fall on our mining and metallurgical enterprises. But the losses will not end there: all of our providers also feel the price increase and raise their tariffs. A chain reaction will go,” — said Alexander Kalenkov.

Losses of grain producers from the price increase will be not less, because the share of farmers accounted for 6% of the market consumption of diesel fuel, plus the cost of liquefied petroleum gas where installation for drying grain. According to preliminary estimates, acting Executive Director of the Ukrainian grain Association Sergey Ivashchenko, every grain producer is spending 60-80 dollars per hectare during the sowing and harvesting campaigns.

“If you multiply the cost of the volume of acreage under grain in a year is 150 billion Grain — a commodity, its prices are formed on the world market. Therefore, the introduction of any fees and an increase in cost is directly proportional to the loss of a farmer or grain producer in Ukraine”, — said Sergey Ivashchenko.

It is easy to understand that an expensive grain flour has risen in price and more of the cost of bread from the pocket of every Ukrainian.

The oil market expert, Director of “Consulting group A-95” Sergey Kuiun believes evaluation of NAU correct. According to him, in the first stage — the initial duties of 8.46% the price of diesel will increase by 1.1 UAH/l, liquefied gas — by 55 kopecks./l.

“No consequences and results, in addition to rising prices, this initiative of Ukrainian refineries will bring. The main threat will be destroyed quite stable and diversified supplies of fuel to Ukraine,” — said Sergey Kuiun.

But lawyers, by contrast, called incorrect requests of our producers, who are asked not only to impose duties, but to increase them annually for five years from 8% to 25%. Partner of law firm Angela mahinova noted that it is fundamentally contrary to the rules of the world trade organization (WTO), and our laws.

“The fee is established retrospectively, if we have an investigation, then this is for 2019 and no further increases unilaterally cannot speak,” explained mahinova.

Experts believe that the introduction of fees will create a greater burden on the Ukrainian economy and consumers, but will not solve the problems of the refinery.

“The applicants have incorrectly diagnosed the source of their problems and accordingly chose the wrong way of solving them – sure Nelya Privalova. The real complexity of a refinery associated with a mismatch in the structure of production fuels (the main product of the domestic manufacturer – gasoline – Ed.) with a basket of consumption, which has appeared in recent years. The rapidly growing liquefied natural gas market (gas is twice cheaper than gasoline – Ed.) in recent years “ate” the market for gasoline. Duty is not correct, will only raise prices for citizens and industry, creating a huge financial burden on the economy.”

NAU believes that in the current situation, the national manufacturer needs abundant investments in the modernization of production aimed at increasing the depth of processing of raw materials. We have it 60%, abroad – up to 96%. This will reduce the cost primarily diesel fuel and will allow it to successfully compete in a free market.