Kazakhstan increases crude oil export duty

The Kazakhstan government has increased the so-called ‘export customs duty’ (ECD) on crude oil from $60 to $80/ton. This change will take effect on 1 April, according to economy and budget planning minister Yerbolat Dosaev, who unveiled the new export tariff at a ministerial meeting.

The ECD increase should boost this year’s projected government revenue by $2.7 billion. The economy ministry has added $1.6 billion to this total in the form of extra tax income to be derived from the exporting industries’ future profits, which are widely expected to ameliorate after the 20% devaluation of the tenge in February 2014.

The ECD was introduced in May 2008 at the rate of $110/ton at a time when international oil prices were as high as $125/barrel. It was argued that the new duty would enable Kazakhstan to benefit fully from increasingly favourable conditions on global markets as well as its expected stabilising domestic effect.

In January 2009, however, the government scrapped the ECD after oil prices had fallen from their historic highs. As the global market stabilised the ECD was re-introduced in August 2010 at the rate of $20/ton. This was applied to all Kazakhstan-based oil exporters except those whose production-sharing agreements guaranteed stability of the customs regime. In January 2011 the ECD was increased to $40/ton and then again to $60 in April 2013.

The government plans for at least 6% GDP growth by the end of 2014, while also containing annual inflation below a 6–8% cap. The benchmark oil price that serves as the basis for all income and expenditure forecasts has also been increased, from $90 a barrel to $95. Some local analysts have already expressed their scepticism about the latter benchmark, given the possible impact of the crisis in Ukraine on future global oil market stability.

Earlier this month the US administration announced its intention to release around 5 million barrels of crude to the market and cited the need to test the sustainability of the US oil infrastructure after a recent surge of domestic production. Some have seen this, however, as a calculated move as part of Washington’s efforts to punish Moscow for its combative stance on

Ukraine’s Crimea peninsula.

While this quantity is clearly too small to have any significant impact on oil prices, expanding US domestic production may upset both Russia’s and Kazakhstan’s medium- to long-term price expectations.

For more news and expert analysis about the Caspian region, please see Caspian Focus.

© 2014 Menas Associates

Nigeria: Sanusi suspension becomes test of will for Jonathan

Central Bank of Nigeria (CBN) governor Sanusi Lamido Sanusi is challenging his suspension by President Goodluck Jonathan in the courts, and the case is becoming an overwhelmingly political clash as accusations are traded publicly.

Sanusi submitted a 36-point memorandum to Jonathan on 17 March which containing detailed rebuttals of the allegations against him contained in a Financial Reporting Council of Nigeria briefing note.

Jonathan’s February suspension of Sanusi was preceded by earlier attempts to get the governor to resign before the June 2014 end of his term. Initially, Sanusi said that he would not seek reinstatement to his post but would test the constitutional legitimacy of the suspension in court to establish a legal principle.

Having been sent a list of infractions at the bank under his management, Sanusi has analysed them and seems to have changed his strategy. He is now publicly asking Jonathan to reinstate him for the remaining three months of his tenure.

A long political and legal battle looms but it is certain that Jonathan will use every tactic to ensure that Sanusi does not get access to the governor’s office before his tenure formally ends. 

The trend of claims and counter-claims in the dispute suggests that there will not be an independent and credible effort to investigate the basis of Sanusi’s concerns about the Nigerian National Petroleum Corporation, which has been unable to account for failing to transfer some US$49.8 billion in revenues from January 2012 to July 2013 to the CBN accounts.

Acknowledging that he lacks the constitutional power to remove Sanusi from office, Jonathan says the governor is free to return to office once he disproves the ‘acts of financial recklessness’ allegations against him. These supposedly arose from recently received audits of CBN accounts.

Sanusi’s quick response to Jonathan’s allegations was to allege that there was a conspiracy supported by bank chiefs who are unhappy that they would have to open their books to independent auditors so that the missing billions can be tracked.

This view, relating to the role of Nigeria’s banks as likely intermediaries in corrupt flows of funds, has been voiced by Sanusi and other financial experts. Prior to his appointment as CBN governor, Sanusi was chief executive of First Bank Nigeria, through which billions of state oil earnings are transferred between state agencies and other institutions.

Sanusi will meet Justice Gabriel Kolawole later this week when he attends a rescheduled hearing on the case. 

For more news and expert analysis about Nigeria, please see Nigeria Focus and Nigeria Politics & Security.

© 2014 Menas Associates