"Does Russia need EITI?", article for the "Neft Rossii" | KPMG | RU

"Does Russia need EITI?", an article for the "Neft Rossii" magazine (issue 7-8, July-August 2016)

"Does Russia need EITI?", article for the "Neft Rossii"

Extractive Industries Transparency Initiative (EITI) is a transparency standard introduced in 2002, which comes down to the following: extractive industry companies disclose their tax information, and the government issues a report demonstrating which part of the tax amount has reached the budget.

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Russia hasn't joined the initiative yet, but the idea is closely studied by a designated working group comprising representatives from relevant ministries and extractive industry companies. So far, the attitude towards joining EITI remains moderate, because the initiative implies certain risks for the participating countries. For example, the EITI constantly introduces new regulations which are mandatory for the participating countries, who must either comply or quit the initiative altogether. Furthermore, in each participating country the EITI implementation is controlled by a multilateral group of interested parties which includes representatives from government, industry and NGOs, and even though such groups are not likely to easily build consensus, the participating country is not allowed to restrict the number of representatives from each of the three parties. Finally, being part of EITI is not a permanent privilege and must be regularly confirmed, which includes spot checks that can sometimes become a lever of pressure in domestic policy.

However, despite these risks and the evident necessity to carefully analyse the question of joining EITI as well as its possible consequences, Russian ministries and oil & gas companies agree that we must not remain idle: standing on the sidelines of the global transparency increase trends will not be beneficial for either the industry or the country in general. One of the solutions can be an alternative participation pattern based on the experience of developed countries, which are not actual EITI members but actively support the initiative and introduce the required laws with local adjustments at the local legislative level.

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