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Russia's government plans tax breaks for oil companies

UST-LUGA (Leningrad Region) - The Russian government is planning a number of tax exemptions for oil producers, including a reduction in mineral extraction tax, Prime Minister Vladimir Putin said on Wednesday.

"Initially, we must reduce mineral tax," the premier told a conference in the port of Ust-Luga in northwest Russia, where an oil terminal is to be built, adding that the tax breaks would help boost oil production and export.

He said a relevant law had already been drafted and considered, and urged the soonest submission of the bill to parliament.

Putin also proposed introducing seven-year tax holidays for companies prospecting for minerals and developing fields. He said the privilege should be used in the Russian Far East, the Timano-Pechora oil and gas province in northern Russia, in the Yamal peninsula in the northeast Urals, and in offshore areas.

His proposals for national oil producers also included measures to manage old deposits, to improve procedures for the amortization of fields, and to introduce a new system of duties and tariffs on oil products.

Putin said Russia would continue honoring its international commitments on oil and gas supplies, while protecting its interests. The premier warned, however, that the country would react to increases in oil and gas transit tariffs by neighboring countries.

"Russia plans to honor in full its commitments to consumers, including European consumers. We should also react appropriately to situations when partners put forward excessive demands, especially when they raise tariffs on oil and gas transit and tap energy resources," Putin said.

Putin stepped down after two terms of office as president on May 7 and the next day was appointed prime minister to support his hand-picked successor Dmitry Medvedev.

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