Exchangization of the Fuel and Energy Sector – New Challenges – New Indicators

KEY CONCLUSIONS

Russia needs to develop the exchange mechanism in the fuel and energy sector

“The development of exchange trading is a transparent tool, the purity of which is difficult to refute. Such a mechanism counteracts manipulation of price data. We believe that the exchange mechanism, including the organization of coal trading on the exchange, will have an extremely positive effect. OTC transactions have been registered for several years and we see that this model is more representative in terms of creating national indicators of the fuel and energy sector,” Sergey Mochalnikov, Deputy Minister of Energy of the Russian Federation.

“An exchange is essentially a tool for achieving market pricing of any commodity. Energy in any form is also a commodity to develop, including inter-fuel competition in the fuel and energy sector, which is very important for our country,” Pavel Zavalny, Chairman of the Committee of the State Duma of the Federal Assembly of the Russian Federation on Energy; President, Russian Gas Society.

“Trading volumes on Russian exchanges will increase and will inevitably move from Western exchanges to Russian ones,” Anatoly Yanovsky, Assistant to the Chief of Staff of the Presidential Executive Office of the Russian Federation.

PROBLEMS

Global information providers left the Russian market 

“We are all well aware that since spring 2022, the world’s leading information service providers have been actively withdrawing from our market. At the same time, both policy issues and business processes, both corporate and governmental, are tied to the information and indices of these providers: from the pricing formula for foreign trade deals to the calculation of duties on export goods. <...> In global oil markets, the representativeness of these indicators, which worked well in a stationary market environment, has declined. Price information is becoming increasingly inaccessible and many market participants complain that published indicators are disconnected from reality and duties and taxes are still counted based on them,” Alexander Dynkin, President, Primakov National Research Institute of World Economy and International Relations of the Russian Academy of Sciences. 

“The main thing now is the formation of national market indicators. <...> We see positive results from exchange trading in oil products. This mechanism allows us to keep prices in check and all participants to forecast, to understand the future and sustainability,” Maksim Shaskolsky, Head, Federal Antimonopoly Service of the Russian Federation (FAS Russia).

SOLUTIONS

Creating domestic agencies

“The creation of a national system of indicators for all types of goods <...> is a very important thing because it gives the right signals for development and investment in each area. Therefore, the sooner we do this, the sooner we will achieve results,” Pavel Zavalny, Chairman of the Committee of the State Duma of the Federal Assembly of the Russian Federation on Energy; President, Russian Gas Society.

“We historically have the main agencies – from NSD, Interfax, and similar agencies. <...> At the initiative of the Bank of Russia, <...> we will implement in various kinds of regulations so that we can get a more representative index, indicators that can probably be used already when calculating the business models of the companies themselves,” Pavel Shakhlevich, Acting Director of Financial Policy Department, Ministry of Finance of the Russian Federation.

“It is the exchange that will create those price indicators that are necessary to enter into contracts, to see the outlook and so on. This is our task <...> until 2030, and we need to achieve it,” Pavel Zavalny, Chairman of the Committee of the State Duma of the Federal Assembly of the Russian Federation on Energy; President, Russian Gas Society.

In order to develop exchange relations, more participants need to be involved 

“There is a need for as many market participants as possible to be involved in this process, and this includes public administration bodies, both at the federal, regional, and municipal level, as well as companies with state participation, so it is probably time to include an appropriate provision in public procurement legislation that would oblige purchasing on the exchange and not only on existing electronic platforms. <...> There is a problem of encouraging different participants in the same product, market participants, to sell as much of it as possible on the exchange. At the same time, I think it would be advisable to continue the current practice of establishing minimum volumes of goods in exchange trading by dominant suppliers, for example, gas, and their gradual, possibly annual, increase, as we see it now, together with the antimonopoly service, with the exchange, as it happens in the oil products market,” Anatoly Yanovsky, Assistant to the Chief of Staff of the Presidential Executive Office of the Russian Federation.

The price of natural gas inside Russia should become market-based 

“It is inter-fuel competition that matters, <...> and it is unfortunately underdeveloped in our country, which distorts this market. <...> For decades, the domestic market has been subsidized by exports, and today this opportunity is practically gone. Maybe we will survive for a year or two due to high prices, but we will have to do something after that. <...> In this matter we need to move towards market education,” Pavel Zavalny, Chairman of the Committee of the State Duma of the Federal Assembly of the Russian Federation on Energy; President, Russian Gas Society.

For more information, visit the Roscongress Foundation’s Information and Analytical System roscongress.org  and the official Forum website rusenergyweek.com.