(Bloomberg) -- President Vladimir Putin urged his government and Russian oil producers to jointly resolve fuel-supply and oil-tax issues less then a week after the cabinet unexpectedly imposed a ban on gasoline and diesel exports.

Domestic fuel “prices are growing, companies want to maximize their profits through exports,” Putin said. “It’s all understandable, they are doing their job, we are doing ours,” he said at a meeting with the government broadcast on Russian state TV. 

To reach a solution, the government may want to look at best practices in other industries, like exports of fertilizers, Putin said. “You supply enough to the domestic market, you can earn externally too; such things exist and are working,” he said.

The Russian leader called for the government to be more responsive to the oil industry’s needs. “It’s a hen that lays golden eggs,” he said.

Putin also mildly criticized the immediate effects of the temporary fuel-export ban, which has been in force since Sept. 21. While nearly all exports of the two motor fuels have been halted, domestic retail prices have continued to rise, he said. 

Putin’s comments signal the nation’s officials and oil firms have yet to formalize strategic long-term steps to calm the Russian fuel market, which is going through its most challenging period since 2018. 

Higher international oil prices and a weaker ruble have prompted Russian producers to send more fuel for export, limiting domestic flows. At the same time, in a move to reduce budget spending amid the war in Ukraine, the government has halved the subsidies paid out to refineries for supplies to buyers at home.

READ: Russia, Oil Companies Wrangle Over Fuel Costs as War Drags On

Unable to stem domestic fuel-price growth ahead of the presidential elections next March, the cabinet took uncharacteristically harsh measures, banning motor-fuel exports. The measure is temporary, according to the governmental decree, yet the document has no end-date for it. 

The ban has already led to a drop in car-fuel prices on the commodities exchange in Russia, Deputy Prime Minister Alexander Novak said at the meeting with Putin. Over the last week since Sept. 21, when the export restriction came into force, average gasoline and diesel prices fell by 20% and 16% respectively, he said. 


The cabinet is looking at more market-oriented steps to boost domestic supplies, Novak said

Among the measures the government proposes is a revision of the decision to halve the downstream payouts, Novak said, without providing specific details. Higher subsidies “would help compensate the difference between the export alternative and the prices on the domestic commodity exchange,” incentivizing supplies to consumers at home, he said.

Another potential step would be to more than double the export duty for companies that do not produce their own fuel, but ship to other countries volumes they purchase on the domestic market. The government could also consider a complete ban on such flows, known as gray exports, Novak said. 

“We could impose a prohibitively high duty, raise it to 50,000 rubles” per ton from 20,000 rubles now, he said.

The government will make a decision on any further steps in the near future, which will help stabilize the domestic market, Novak said.

“We will expect that the proposed measures will work, but you need to cooperate with the companies closer, they need to understand their responsibility as well,” Putin responded.

(Updates with charts, additional comments from Novak in the ninth paragraph.)

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