Russia seems to arrive at a turning point once or twice a month. Since early October, for example, the ruble's value has collapsed, the financial bureaucracy has lost two key figures, and six non-Russian oil and gas producing groups have won exemption from the oil export tax.
These are potential turning points. Yet they raise more questions than they answer.
Will the parliament accept resignation of the central bank chairman, Victor Geraschenko? Will Tatyana Paramonova, appointed by President Boris Yeltsin to succeed Geraschenko, live up to her reputation as a tough inflation fighter and hard-liner on interest rates--if she keeps the job?
Where would parliamentary rejection of Geraschenko's resignation leave Yeltsin, who dismissed Sergei Dubinin, acting minister of finance, at the same time he urged the central bank chief to leave? Is this just more command and control, Muscovite politics or reversion to economics of the same variety?
THE TAX EXEMPTION
The political purge touched off by the ruble's collapse tended to obscure the tax exemptions. Yet that move could have greater long term effect on the Russian economy, to which Yeltsin's political fortunes are unshakably tied.
The $5/bbl tax imposed without warning at the beginning of 1992, has come to symbolize the difficulties of doing business in Russia. Russian officials explained the levy as an effort to balance difference between international and domestic prices for Russian producers exporting part of their output and for brokers selling domestically produced oil outside the country. Or something like that.
The tax's main effect was to ruin economics of most exploration and development projects. Not to worry, officials said: Exemptions would be forthcoming. And companies apparently garnered sufficient assurance that this would be so to move several projects forward, however cautiously.
For affected companies and projects, exemption from the export tax is indeed a turning point. But questions remain. Why did it take 33 1/2 months for the Russians to act on a mistake that so obviously threatened the country's sole hope for reviving oil production? And why selective exemption rather than outright repeal? Can other groups and future projects plan on exemption from the export tax?
The usual answers are wearing thin: politics, distrust of outsiders motivated by profit, uncertainty with new economic and political systems. At some point, Russia's politicians, its distrustful and uncertain old-timers, are going to have to face necessity. They--and, more importantly, the Russian people--need foreign oil companies at least as much as the companies need Russian projects.
Oil companies don't have to prove they are serious about finding and developing Russian oil and gas reserves. They have endured political revolts, come-and-go taxes, rule changes, and endless jurisdictional perplexities. They have risked their money and committed people and equipment to Russian projects. What they need in return is the chance to earn a fair profit and consistency in taxation and regulation.
THE NEXT TURNING POINT
It's time for the Russians to prove they are serious about the exploration and development that their domestic industry can't perform on its own and that their economy cannot do without. Repeal of the export tax would make a good start.
The next turning point should be passage of basic petroleum legislation, something to lay a generic legal foundation for production sharing and other petroleum agreements. It's due by the end of the year. Of course, it was due by the end of last year, too.
