According to the ministry, the code will include a gradual formula starting with a lower export tax for API Group I base oils, to a higher export tax for hydrocracked products such as Group II and Group III base oils. Definitely, it wont be a fixed rate, the minister said, adding that a government tax unit is doing consultations at the moment, and detailed information on the rates will be available in the coming days.

In late December 2013, Lukoil President Vagit Alekperov, Gazprom Neft President Alexander Dyukov and Tatneft General Director Nail Maganov appealed to Prime Minister Dmitry Medvedev to slash Russias lubricant export tax to 20 percent of the crude oil export duty. The measure, they said, could improve the lubricants industrys dire situation and free the market from dependence on imported base oil.

The duties apply to both base oils and finished lubricants. Lube Report obtained a copy of the letter.

The principal volume of finished lubricants and greases consumed in the country is produced with the use of Group I and Group III base oils, the oil majors heads said in the letter that they signed Dec. 26. Base oil products have high added value, and are traded at a premium over petrochemicals. While Russia has several plants that have Group I base oil production capacity, the companies stated in the letter, the demand for Group II and III base oils is satisfied by imports.

Currently, the lubricant export duty stands at 66 percent of the crude oil export duty, and since 2011 the government planned to increase it to 100 percent of the crude oil export tax by 2015. Last month the finance ministry joined the debate and proposed to keep the rate at 66 percent.

To stimulate the Russian production of high quality base oils, the Russian oil majors asked the government to introduce a significantly lower base oil export tax. They claim that production and sale of Group I base oil on the international markets is unprofitable under the current tax rate. The lower tax could generate more funds for modernization of the current capacities and construction of new ones, while easing the country’s import dependency, they said.

Global oil majors Shell, ExxonMobil and Total supply the lions share of high quality base oil and finished lubricants imported into Russia.

Russia covers 90 percent of its total higher quality finished lubes demand with imports. The country imported 400,000 tons of these products in 2012, according to the finance ministry.