Finance Minister Anton Siluanov urged to protect the economy and finances from fluctuations in oil prices, focusing on structural price of $40-50 per barrel, and create tax incentives for investment in alternative energy sources. The Minister of economic development Alexei Ulyukayev, in turn, said such decisions is “the answer to poor public administration system”. In his opinion, the government has no sacred knowledge that will allow you to dispose of income is better than do oil companies
The mistakes of the past
“From the point of view of public finances, I think it is absolutely clear what to do: we need to stop guessing what will oil tomorrow, the next day to determine our forecasts,” – began his speech at a business Breakfast Sberbank at the St. Petersburg economic forum, entitled “Life after oil,” Anton Siluanov. “We create our own shocks, they create problems for the budget, economy, exchange rate, monetary policy, because they want to hope that something like this happens, the oil will return to $100 a barrel, increase of salaries, pensions, and begin to lay it in our plans,” he explained.
According to the Minister of Finance, the lack of rigidity of budgetary policy of previous years was one of the major mistakes of the government, so the decline in oil prices was so painful for Russia. To avoid repeating the mistakes of the past, Siluanov offers “to take when planning the budget, economy, financial policy, structural price of oil at $40-50 per barrel, and on this basis to build all other financial opportunities.”
The Minister criticized the existing system of tax incentives for oil and gas companies. “We intend at any cost to increase production. But we don’t have any cost to invest in new projects, an important cost of oil produced from these wells, it needs to be competitive,” he explained. Siluanov added that the time has come to promote alternative energy sources, for example, it is time to introduce preferential taxation of electric cars.
Finally, according to the Minister of Finance needs to encourage the oil companies to invest revenues from oil assets, but also in related industries, chemistry, petrochemicals, etc.” Siluanov believes that it is “what will remain when we have other alternative sources of energy.”
“Unfortunately, when I met with the oil companies and asked why they don’t do it when you have money, a good situation, why not invest in other industries which have high margins, they answered that do not know anything else to do,” he said, noting that this is an incorrect view of the situation: “it is Necessary to look a little forward,” – concluded Siluanov.
Devastation in the minds
The Minister of economic development Alexei Ulyukayev with theses colleagues did not agree. The desire to move away from hydrocarbons to alternative energy sources he found it illogical. “All energy sources are renewable, fossil fuels – is solar energy transformed in a certain way, it just all depends on the investment horizon, what horizon you have three months or three thousand years,” – said Ulyukayev.
Ulyukayev did not like and suggestions of the Ministry of Finance on the budgetary rule. “That’s according to my friend, Anton Siluanov, you have to head to take some price and from it we build our lives. The chances that the price will be right, exactly the same as the probability to meet in the street the green monkey – 50%: either meet or not. Same with the price of oil, let’s take the zero, let’s take a minus ten. I think this is a completely pointless exercise,” – said Ulyukayev.
Finally, the Minister of economic development criticized the initiative of our colleagues in tax benefits. “The short answer is “let’s surpluses take money in reserves” – is the answer to poor governance in the state. Not to create the temptation of inefficient spending, you take away somewhere and hide these funds”, – he was indignant.
The government will not be able to dispose of means of the companies, said Ulyukayev. “We do not believe that the market will be able to properly dispose of the money that oil and gas companies are able to invest wisely, we do not believe that the financial system is able to reasonably diversify these cash flows. We think that we are the holders of sacred knowledge, we will identify oil and gas sector to the financial sector. But really, think this sacred knowledge we have,” he explained.
According to the speaker, need to stop exercise for alteration and deterioration of working conditions for oil and gas companies, to give colleagues the ability to work quietly and to earn money”. The challenge is how to build a proper high quality system of decision-making in the budget, in the economy. “We need a fiscal rule, and the right budget, ie the budget that directs us to development. Ruin not in toilets, and in heads”, – summed up the Minister of economic development.