Russias first deputy prime minister andrey belousov sat patiently and listened to the pleas from some of the countrys richest men, arguing why it was unjust for their metals and mining empires to pay more tax to help fill the hole the pandemic has blown in moscows budget.
But when they had finished their arguments, he gave a blunt response.
What are you talking about? have you even been out on to the street?, he snapped, according to three accounts from the meeting. we have spent rbs4tn roubles...borrowed it on the market with interest. why are you whining? we have cut budget spending by 10 per cent...what justice are you on about?
The virtual meeting fell silent. the billionaires got the point.
The tax raid may well be a harbinger of future measures forcing the natural resources industry to provide more financial support for the kremlin. the pandemic appears to be heading for another wave of infections and economically damaging lockdowns this winter and into next year.
A public spending splurge planned before the pandemic and the subsequent economic crisis has left the countrys finance ministry with a $50bn deficit this year, equivalent to around 4 per cent of gross domestic product.
Hence the meeting with the industry bosses, who included steel tycoons alexei mordashov, owner of severstal and worth $20bn and nlmks vladimir lisin, worth $23bn. many were outraged that the new tax had been sprung on them so suddenly. few had expected such a sharp response.
[belousov] was rude, but he said that stuff in a way that it was obvious this had already been decided by the president, said one person involved in the discussion. he had the meeting as a formality.
The change that was presented and passed by russias rubber-stamp parliament on wednesday was an increase in the mineral extraction tax on companies that mine metals, ores and rock used to make fertilisers by 3.5 times from next year. moscow says this will raise rbs56bn ($700m) and affect domestic production only, with no impact on export prices or global commodity markets.
Gold and diamond producers, which already pay higher taxes than other mining groups, are exempt.
Mr belousov has been here before. two years ago, he tried to drive through a similar plan to tap almost the same companies for $7.5bn of what he called excess profits. the initiative was met with a barrage of criticism and was ignominiously shelved.
Now, the kremlin is having the last laugh. the economic crisis caused by the pandemic, which has seen billions of roubles in state aid doled out to companies and households, has given it the perfect excuse to dust off the plan and redeploy it in a revised guise.
In russias system of government, where powerful oligarchs and state companies often use their considerable influence to direct policy, many believe there may also have been heartfelt encouragement for the tax rise from other industries.
Indeed, as moscow pushed through the new charge and ended tax breaks for a number of oilfields in order to raise more cash, kremlin-controlled oil producer rosneft was simultaneously granted tax breaks for two of its developments.
Rosnefts chief executive igor sechin, a close and old friend of president vladimir putin, has long argued that the tax treatment of mining and metals is far friendlier than that applied to the oil industry.
The mining ceos argue the tax rise will cut investment, hitting future output, job creation and economic growth.
It is ridiculous. but they understood what they could take from us, and they did, according to another person who was at the meeting. the way in which it was done, the mechanism they used is wrong...and they will probably do it again.
Is it a one-off? is it for three years? or is it forever? the first person asked. and the biggest worry is that they will keep coming back for more. sure, rbs56bn is ok but rbs560bn is not,
No company likes to pay more tax, even those that are reaping higher profits thanks to a weaker rouble that has lowered domestic costs and boosted export earnings. and oligarchs with fortunes larger than some small countries are no different.
But russias metals and mining tycoons might be better off adopting mr belousovs tactic of accepting a rebuke, licking their wounds and saving their powder for future fights. covid-19 is unlikely to go away anytime soon, and neither is moscows need to find new tax revenues.