Crimean Occupation Tax

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Crimean Occupation Tax (COT) _______________________________ Tax on all Russian energy imported in the EU: Oil, Gas, Coal Medium intensity Gradually increasing up to 25% Benefits: Easy to understand in EU & Russia Aimed at restoring International law & Borders Allows market to reduce EU energy dependence on Russia Generates revenue to save energy Funds Ukraine Russia controls cancellation Project COT Revenue: €25 Billion averaged annually €20 Billion EU €5 Billion Ukraine (grants) COT -> energy efficiency fund €1 invest -> €2 gain EU countries that pay COT tax with most initial pain -> get most future gain 80% of initial pain stays in country As of 2016 Russia funds COT 100% to preserve EU income initial pain countries get gain pro rata Russia funds 50% of 2016-2020 EU energy preservation investments COT impact on Russia: Less government income Russian government is largely funded through energy export tax Less money for military No to negative economic growth 2015-2020 Alternative customers are not easy to obtain Important players not really in need China, US No margin for Russian export tax in recent China gas deal Reachable only through expensive LNG transport No marging for Russian export tax subsidizing COT tax is cheaper for Russia COT impact on EU: Reduced dependency on Russian energy Stage one initial pain but funds Ukraine Russia cannot afford to lose EU market : Russia energy price + COT = market price Stage two Russia funds Ukraine for duration of Crimean occupation + 50% of EU energy efficiency effort Worst case: Russian EU supply stop would cause a budget reduction of €223 billion to just €89 billion = economic suicide Saudi Arabia will supply Russia oil shortfall Coal from US, Canada, South Africa Gas substituted through startup of 10 nuclear power plants Gas substituted through coal Sources: European Council, European Commission

Transcript of Crimean Occupation Tax

  • Crimean Occupation Tax (Confidential draft) Presentation of H. Van Rompuy President of the European Council to the European Council
  • Crimean Occupation Tax (COT) Tax on all Russian energy imported in the EU: Oil, Gas, Coal Medium intensity Gradually increasing up to 25% Source: European Council
  • Benefits Easy to understand in EU & Russia Aimed at restoring International law & Borders Allows market to reduce EU energy dependence on Russia Generates revenue to save energy Funds Ukraine Russia controls cancellation
  • Projected COT Revenue 25 Billion averaged annually 20 Billion EU 5 Billion Ukraine (grants) COT -> energy efficiency fund 1 invest -> 2 gain Countries that pay COT tax with most initial pain -> get most future gain 80% of initial pain stays in country As of 2016 Russia funds COT 100% to preserve EU income initial pain countries get gain pro rata Russia funds 50% of 2016-2020 EU energy preservation investments Source: European Council
  • Energy Efficiency is Key Estimated savings from current commitments on energy efficiency Source: European Commission
  • Source: European Commission Reaping the Benefits of a Fully integrated energy market up to 2030 Connecting and Diversifying
  • COT impact on Russia Less government income Russian government is largely funded through energy export tax Less money for military No to negative economic growth 2015-2020 Alternative customers are not easy to obtain Important players not really in need China, US No margin for Russian export tax in recent China gas deal Reachable only through expensive LNG transport No margin for Russian export tax subsidizing COT tax is cheaper for Russia
  • COT impact on EU Reduced dependency on Russian energy Stage one initial pain but funds Ukraine Russia cannot afford to lose EU market : Russia energy price + COT = market price Stage two Russia funds Ukraine for duration of Crimean occupation + 50% of EU energy efficiency effort Source: European Council
  • Worst case scenario Russian stops all energy supplies to EU Causes Russian budget reduction of 223 billion to just 89 billion = economic suicide EU alternatives in place: Saudi Arabia will supply Russia oil shortfall Coal from US, Canada, South Africa Gas substituted through startup of 10 nuclear power plants Gas substituted through coal