Crimean Occupation Tax
(Confidential draft)
Presentation of H. Van RompuyPresident of the European Councilto the European Council
Crimean Occupation Tax (COT)
• Tax on all Russian energy imported in the EU: Oil, Gas, Coal
• Medium intensity• Gradually increasing up to 25%
Source: European Council
Benefits• Easy to understand in EU & Russia• Aimed at restoring International law &
Borders• Allows market to reduce EU energy
dependence on Russia• Generates revenue to save energy• Funds Ukraine• Russia controls cancellation
Projected COT Revenue
• €25 Billion averaged annually – €20 Billion EU– €5 Billion Ukraine (grants)
• COT -> energy efficiency fund €1 invest -> €2 gain• Countries that pay COT tax
– with most initial pain -> get most future gain– 80% of initial pain stays in country
• As of 2016 Russia funds COT 100% to preserve EU income– initial pain countries get gain pro rata
• Russia funds 50% of 2016-2020 EU energy preservation investments
Source: European Council
Energy Efficiency is KeyEstimated savings from current commitments on energy efficiency
Source: European Commission
Source: European Commission
Reaping the Benefits of a Fully integrated energy market up to 2030
Connecting and Diversifying
COT impact on Russia• Less government income
– Russian government is largely funded through energy export tax
– Less money for military • No to negative economic growth 2015-2020• Alternative customers are not easy to obtain
– Important players not really in need– China, US – No margin for Russian export tax in recent China gas deal
– Reachable only through expensive LNG transport• No margin for Russian export tax• subsidizing COT tax is cheaper for Russia
COT impact on EU• Reduced dependency on Russian energy• Stage one initial pain but funds Ukraine• Russia cannot afford to lose EU market : Russia
energy price + COT = market price• Stage two Russia funds Ukraine for duration of
Crimean occupation + 50% of EU energy efficiency effort
Source: European Council
Worst case scenario• Russian stops all energy supplies to EU• Causes Russian budget reduction of €223 billion to just €89
billion = economic suicide• EU alternatives in place: – Saudi Arabia will supply Russia oil shortfall– Coal from US, Canada, South Africa– Gas substituted through startup of 10 nuclear power
plants– Gas substituted through coal
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