Russia proposes higher fuel price benchmarks for damper subsidy

Russia’s government wants to raise the fuel price benchmarks that decide whether oil companies qualify for the damper, the budget subsidy that keeps petrol and diesel cheaper at home than abroad.

The indicative average price of AI-92 petrol would rise to RUB66,350 ($794) a tonne in 2027 and RUB69,000 ($826) in 2028, up from the RUB64,200 and RUB66,100 now written into the Tax Code, state news agency TASS reported on October 1. A benchmark of RUB71,750 ($859) would be set for 2029.

Diesel’s 2027 benchmark would go to RUB62,800 ($752) a tonne from RUB60,750, and its 2028 benchmark to RUB65,300 ($781) from RUB62,600, with RUB67,900 ($813) proposed for 2029. Jet fuel would rise to RUB71,650 ($857) from RUB70,000 in 2027 and to RUB74,500 ($892) from RUB72,800 in 2028, reaching RUB77,500 ($927) in 2029.

The figures come from the materials accompanying a government bill amending parts one and two of the Tax Code, which has been submitted to the State Duma. It comes alongside the government’s draft 2027-2029 budget and a proposed windfall tax on metals, mining and fertiliser producers.

The increases are small, at 3.3% for 2027 and 4.4% for 2028 on petrol, but they come in the middle of a fuel crisis driven by Ukrainian drone strikes on Russia’s refineries. Exchange prices are already above the proposed 2027 level: AI-92 ended the week to September 25 at RUB69,552 ($832) a tonne on the St Petersburg Exchange, ABN reported.

The damper pays oil companies for supplying petrol and diesel to the domestic market at prices below what they could earn by exporting, making up part of the difference from the budget. Under the Tax Code, nothing is paid for any month in which average exchange prices exceed the indicative price by more than 20% for petrol or 30% for diesel.

On the proposed 2027 benchmarks, that cut-off would sit at about RUB79,620 ($953) a tonne for AI-92 and RUB81,640 ($977) for diesel.

Budget payments under the damper reached RUB197.3bn ($2.4bn) in August, covering July, and the finance ministry has said it is ready to discuss extending the separate import damper to cover transport costs for fuel shipped from ports to central Russia.

Tax Code amendments published the same day would also raise fuel excise duties every year from 2027 to 2029, according to PRIME. Excise on class 5 petrol would rise to RUB19,126 ($229) a tonne in 2027 from the RUB18,677 now planned and to RUB19,891 in 2028 from RUB19,424, reaching RUB20,687 in 2029. Diesel excise would go to RUB13,566 ($162) and RUB14,109 in 2027 and 2028, from RUB13,248 and RUB13,778, and to RUB14,673 in 2029.

Moscow has banned petrol exports until January 31, 2027, and regions from Kaluga to Zabaikalsky have reintroduced fuel rationing as the strikes continue.

Earlier, President Vladimir Putin has said Kyiv opened a Pandora’s box by hitting Russia’s economy, with US President Donald Trump asking Kyiv not to hit diesel stores due to shortages across the globe on the back of the Iran war.