Russia’s Oil Tax Holiday and Skolkovo

Russia’s Finance Minister Alexei Kudrin was not at all pleased to see the country’s foreign reserves dwindle during the 2008 crisis down to some $40 billion.  Now that the economy (and oil prices) have picked up, the Ministry is looking to take advantage by putting an end to the tax holiday for oil exports, and funnel a higher amount of these revenues toward modernization projects such as the Skolkovo Valley innovation center.  However Igor Sechin and Rosneft see things a little differently.  From the Financial Times:

Few argue against the need to modernise the economy, but many in the oil industry argue that modernisation would be best driven by improving the overall investment climate, particularly for the energy industry, so the country can harness its natural resource advantages to drive modernisation in the rest of the economy.

The current push toraise taxation on the sector and plough billions of dollars intobuilding a “Russian Silicon Valley” in Skolkovo outside Moscow is, formany energy sector advocates, a waste of money and could strangle theoil industry as a main source of growth.

“They are going to buildSkolkovo and still find themselves in the middle of an eight lane[technology] highway in five years time, where they are going to getflattened,” says one expert, speaking on condition of anonymity. “Chinaand India are just much faster,” in the sphere of high-tech.