Parliament proposes new duty on energy, fuel imports from Russia

The parliamentary committee on energy, housing, and communal services proposed the introduction of a 4-5% duty on fuel and energy imports from Russia on Dec. 28, according to news outlet Ekonomichna Pravda.

Committee chair Andriy Gerus was quoted as saying that Ukraine’s parliament is considering raising the duty on imports of both fuel and energy. This includes diesel, gasoline, LPG (liquefied petroleum gas), and electricity, as well as thermal, lean, and anthracite coal.

Duties already exist on Russian energy, notably a 4% tax on diesel, 3% on LPG, and 65% on thermal coal, however, these are scheduled to end on Dec. 31.

The import of electricity from Russia and Belarus imposed in May expired on Nov. 1, after which Ukraine restarted imports from Belarus, but not Russia.

Energy imports from Russia have been a controversial issue since the start of Russia’s war in the Donbas and Crimea in 2014. Reliance on Russian energy is now viewed by many in Ukraine as a threat to national security.

A post on the official website of the Cabinet of Ministers states that the government is undertaking “a brand new approach to energy security under the pressure of economic aggression, continuous blackmailing from Russian state-run corporations, and the threat of energy supply disruption from Russia.”

According to Gerus, the proposed tax would raise funds for the state budget and the protection of Ukraine against Russian aggression.

The proposal is likely to affect Ukraine’s imports of LPG and diesel. The country remains heavily dependent on Russian diesel imports, importing over 1.5 million tons of fuel from its neighbor in 2021.

In 2019-2021, the Ukrainian government raised more than Hr 1.5 billion ($55 million) in duties on LPG and diesel originating from Russia.

However, the committee's proposal looks unlikely to have any practical application in the context of Russia’s current coal blackmail of Ukraine.

Until recently, Ukraine was reliant on Russia for most of its energy needs. In 2020, 70% of Ukraine's coal imports came from Russia, according to data from the U.S. Energy Information Administration.

This came to an abrupt halt on Nov. 1, when Russia halted exports of thermal coal to Ukraine. Since then, no shipments of coal used for producing electricity have arrived.

This has proved costly to Ukraine. Russia has been driving up the cost of natural gas by cutting its use of Ukraine’s gas transit infrastructure. With Russian coal imports suspended, the Ukrainian government was forced to buy gas at expensive market rates for the winter heating season.