Relevant topics

2014 February 7

Customs to follow FAS instructions

Last year saw an attempt to introduce new “rules of playing” at the bunkering market of Russia. It was simultaneously made by the Customs and Rosneft in the name of the company President Igor Sechin. Both initiatives restrain competition and the unauthorized move of the Customs was opposed by the Federal Antimonopoly Service.

Double blow

In summer-autumn of 2013, the bunkering market was “attacked” by two initiatives simultaneously. It is just anybody's guess if they were two parts of a single plan but both were targeted at the limitation of the competition in this market. 

On August 22, 2013, Pavel Strelnikov, Chief of the Central Energy Customs (CEC), forwarded a teletypogram with the instructions to allow bunkering of vessels only at dedicated oil terminals of seaports, if there are such terminals there. Thus, offshore bunkering became impossible. 

In the result, dozens of vessels could not be bunkered on time and the Russian Association of Marine and River Bunker Suppliers turned to the Federal Antimonopoly Service of Russia with a complaint against the CEC actions.

Meanwhile, on October 7, 2013, it was reported that Rosneft President Igor Sechin had addressed RF Prime Minister Dmitry Medvedev with a proposal to hand over the regulation of Russian bunkering market to vertically integrated oil companies (VIOCs). 

According to Sechin’s letter, the volume of Russia’s bunkering market is estimated at 8-9 mln t per year with subdivisions of vertically integrated systems accounting for 70% of sales.

The letter also says that apart from VIS subdivisions, Russian bunkering market is represented by a pool of independent players which “purchase fuel from mini plants, so called “teapot refineries” producing low-quality products”. “Later these dumped products are sold through shadow and offshore schemes, leading to considerable shortfall of taxes in the budget,” Sechin writes.

Sechin also expressed his opinion that state fiscal agencies have no possibility to execute proper control of bunker fuel sales.

The resolution of Dmitry Medvedev ordered RF Transport Minister Maxim Sokolov and head of the Federal Customs Service Andrei Belyaninov to elaborate notes on the development of port infrastructure and the bunkering market. The story continued on October 9, 2013 with a teletypogram of Igor Golodayev, deputy chief of CEC, which actually echoed Sechin’s arguments concerning “teapot refineries”. According to the new instructions, bunkering operations at outer/inner anchorage of seaports were allowed under certain conditions. Offshore bunkering was permitted if it is performed by specialized bunkering companies of vertically integrated structures "as participants of foreign economic activities with a low risk to violate the existing legislation," as well as by “other business entities” supplying fuel produced by refineries put into operation under orders of RF Ministry of Energy. As CEC representatives told IAA PortNews, bunker suppliers were obliged to provide the Customs with documents confirming that the fuel is produced by the authorized refineries.

Sechin’s arguments were opposed by the Russian Association of Marine and River Bunker Suppliers, according to which mini-refineries supply no more than 2% of fuel for bunker production in Russia. The main reason for this fuel to appear in the bunkering market is the lack of affordable and high quality fuel produced by VICs at the raw exchange market, the Association says.

As IAA PortNews learnt from the Association, before the FAS meeting dedicated to the above teletypograms, CEC had suspended the instructions “because of the publication of the all-Russia risk profile aimed at prevention of ship supplies from being used for purposes other than those described in Chapter 50 of the Customs Code of the Customs Union”. This document was marked as “For official use” and that was used as a ground for FAS to issue an improvement notice  under which Central Energy Customs should eliminate violation of the competition laws through revocation of the mentioned teletypograms.

So, the attempts to restructure the bunkering market have failed so far though it doesn’t mean they will not be made in the future. The more so as October theses of Sechin have not disappeared and were supported by the Federal Antimonopoly Service when it proposed to set a minimum selling price for bunker. In this context, it is entirely possible that new rules will be finally proscribed for the bunkering market.

Vitaly Chernov

Read more about the bunkering market situation in the new issue of “Port Service. Bunkering Market” journal available at the editor’s office of IAA PortNews >>>>