MYSTIQUE OF SYSTEMS 2: DIVIDENDS

Date: November 2, 2026
Narrator: Chloe Magurskaya

PROLOGUE: TWO ACCOUNTING SYSTEMS OF ONE STRUCTURE

In the previous issue, we discussed how the chain remains invisible and how oil depots were destroyed “according to the formula.” Today, we will look at the numbers. Not the figures companies display in investor presentations, where everything is “growing” and “being optimized.” But the figures that remain outside the brackets.

Corporate reporting contains two parallel worlds.

• In the first, there are operating expenses that must be reduced (closing an oil depot, laying off personnel, cutting employee benefits).

• In the second, there is profit distribution that must be maximized (dividends, incentive programs, bonuses).

The problem is that these two worlds rarely intersect on the pages of the same document.

I decided to put them side by side. No emotions. Just numbers and sources. This is not an accusation. This is accounting. And when everything is laid out on one table, it becomes clear how “optimization” in one corner is financed by “rents” in another.

PART I. THE FUEL DAMPER: A MANUAL FISCAL PROSTHESIS

Let’s start with the money flowing into the industry from outside — from the state budget.

During the first nine months of 2026, the budget paid oil companies RUB 1.221 trillion under the fuel damper mechanism. In September alone, payments reached a record RUB 305.5 billion in a single month.

This is not “industry support” in the traditional sense. It is compensation for the difference between the export price and an administratively determined domestic benchmark calculated according to government-approved standards.

But there is an architectural nuance here that changes everything.

The fuel damper is not an automatic mechanism. It does not function as a “built-in stabilizer.” It requires constant manual intervention: changing benchmarks, shifting thresholds, and revising formulas.

Over the past six years (2020–2026), at least 15 major tax policy changes have taken place. Six of them concerned the fuel damper. Every year, the parameters changed. Every year — another “adjustment.”

And this is a systemic failure.

The absence of automatic responsiveness means the mechanism does not work independently. It cannot perform its intended function without constant intervention.

And if a mechanism cannot operate autonomously, it is not really a mechanism. It is a manual fiscal prosthesis.

But the most alarming issue is its dependence on global oil prices.

The damper is designed around high prices. If oil falls to $10–20 per barrel (as happened in 2020, when prices even turned negative), the damper reverses direction.

Companies will begin paying the budget. Then they will move into losses. And these losses will not necessarily reflect actual economic conditions, but rather their own formulas — the same DCF models that, as demonstrated by a 2016 graduation project, fail to match reality.

This is not protection against volatility. It is a source of volatility.

And this is a systemic failure.

The question: if a mechanism requires constant intervention, is it efficiency or an administrative prosthesis? The answer lies on the other side of the balance sheet.

PART II. DIVIDENDS: HOW MUCH GOES TO SHAREHOLDERS

Let’s take LUKOIL.

For 2024, the company recommended paying shareholders RUB 541 per share (approximately RUB 374 billion). For the nine-month period, another RUB 514 per share was recommended (approximately RUB 356 billion).

In total, dividends could have exceeded RUB 730 billion against net profit of RUB 848.5 billion.

This means that almost all net profit — 86% of the total — was directed toward shareholder distributions.

• Just over RUB 100 billion remained for modernization, construction of new oil depots, and infrastructure renewal.

• Even that money, according to the company’s reporting, was primarily spent on maintaining existing capacity rather than expanding it.

The context matters here.

In 2024, the company operated amid high oil prices and record fuel damper payments.

In other words, money paid by the budget to “contain fuel prices” was partially transformed into shareholder dividends.

This does not mean anything illegal occurred.

It means that the architecture works precisely this way: the budget pays to prevent prices from rising, while the company distributes its profits among shareholders.

And if those shareholders include top management, a question arises: who exactly benefits from this “price stabilization”?

PART III. BONUSES: HOW MUCH GOES TO MANAGEMENT

Next comes the incentive program for key employees.

Since 2018, LUKOIL has operated a system under which approximately 1,000 managers receive company shares.

In 2024, approximately RUB 100 billion was spent on share buybacks (15.2 million shares).

Over eight years, approximately 59 million shares were distributed, representing 8.5% of the company’s authorized capital.

The current value of this package is approximately RUB 432 billion.

Divided among 1,000 people, that amounts to approximately RUB 432 million per person.

This is not a salary in the traditional sense. It is the value of the share package received by management under the incentive program.

And here another question arises: what exactly was being rewarded?

• Growth in production?

• Efficiency?

• Or the ability to close oil depots “according to the formula” without triggering a public scandal?

The answer lies in the same framework as the previous question.

A management incentive program is not simply a “reward for work.” It is a mechanism for redistributing profits in favor of a narrow group of individuals.

And when those profits are generated partly through the fuel damper, the budget effectively finances this redistribution.

But there is another nuance.

Management incentives are not one-time payments. They are a long-term system that creates an alignment of interests between management and shareholders.

Management becomes interested in increasing market capitalization rather than developing infrastructure.

And when the choice comes down to closing an oil depot (reducing costs) or preserving infrastructure (increasing costs), the decision becomes obvious.

PART IV. PERSONAL INCOME: HOW MUCH GOES TO THE TOP

There is another layer: the personal income of top executives and co-owners.

• Former LUKOIL co-owner Leonid Fedun reported income of RUB 94.15 billion for 2025. This included proceeds from selling approximately 10% of LUKOIL to the company itself (Reuters valued the transaction at $7 billion), as well as dividend income.

• Gazprom Neft CEO Alexander Dyukov received personal income exceeding RUB 4.6 billion, a significant portion of which came from dividends paid by SIBUR, which operates with Gazprom Neft under special arrangements.

This is not “theft.” These are legal earnings.

But when we add these figures to the fuel damper payments made by the budget and the oil depots that have been closed under the banner of “optimization,” another question emerges:

What exactly was optimized?

The answer: infrastructure that does not generate quick profits was optimized away. Meanwhile, the profit-distribution system that generates immediate returns was preserved.

This is not a conspiracy.

This is accounting.

PART V. SUMMARY TABLE: THE ACCOUNTING OF RENT

Let’s put everything into one table. No emotions. Just figures and sources.

PART VI. HOW MUCH WOULD IT HAVE COST TO PRESERVE THE OIL DEPOTS?

Now let’s compare.

If we are talking about oil depots being closed “to optimize costs,” let’s examine how much it would have cost to keep them operating.

Take the Volgograd Region.

In 1995, LUKOIL-Volgogradnefteprodukt operated 35 oil depots. By 2011, only six remained.

Twenty-nine facilities were closed.

If we assume that each oil depot required an average of RUB 10–15 million annually for maintenance (tank servicing, salaries, repairs), then the total cost of maintaining all 35 facilities would have been:

Approximately RUB 350–525 million per year.

For comparison: LUKOIL’s dividends for 2024 amounted to RUB 730 billion.

This means that preserving the oil depots in one region would have cost:

0.05–0.07% of total dividends.

These are not “unaffordable expenses.” They are a rounding error.

And when a company closes oil depots “to optimize costs,” it saves 0.05% of its dividends but creates shortages in the region — shortages that later have to be compensated for through budget-funded damper payments and higher prices.

And this is where the central architectural question emerges.

• On one side of the scales: 0.05% of one company’s dividends.

• On the other: national energy security, regional fuel availability, and the stable operation of agricultural producers, municipal services, and transportation.

This example is not an isolated case.

The same arithmetic can be applied to any strategic asset:

• Refineries closed “according to the formula.”

• Pipelines.

• Energy generation capacity.

Everywhere, the optimization of costs is measured in fractions of a percent of profits, while the consequences for the country are measured in billions and years of recovery.

This is not about “greed.”

It is about the architecture of priorities.

When 0.05% of dividends weighs more than the country’s energy security, this is no longer economics.

It is redistribution.

PART VII. HOW THE FORMULA HIDES THIS MONEY (AND WHY IT WAS REMOVED)

Why is this not visible in corporate reporting?

Because the DCF model does not treat infrastructure as “insurance.” It treats it as an “expense.”

In the model, an oil depot is not a “reserve in case of refinery failure.” It is a “cost center” that needs to be reduced.

But the issue goes beyond the model itself.

An attempt to make the entire chain visible had already been made.

In 2011, the editor-in-chief of the journals Kafedra, SforNews, and I Think So proposed a system of performance indicators for LUKOIL’s distribution companies.

The indicators were not absolute. They were local, relative, and dynamic.

The system included:

• Operating income per facility.

• Margin per ton.

• Costs per ton.

• Labor productivity.

• Activity coefficient.

The system was proposed. Tested. Implemented as a monthly analytical tool for the company.

It worked.

It showed the actual efficiency of individual facilities rather than averaged figures for an entire region.

Original source: In issue No. 1 of the journal InfoTEK (2011), pages 46–50, an article titled “Tools for Analyzing the Performance of Petroleum Product Supply Organizations and Motivating Change” was published.

The author was T. V. Burmagina, Deputy Head of the Sales Development Department at LUKOIL.

The article describes the benchmarking mechanism implemented within the company and its results.

The system was proposed for implementation across vertically integrated oil companies.

It was not implemented across the industry. Over time, it was also dismantled within LUKOIL.

Why?

Because a performance measurement system makes the chain visible.

And a visible chain means accountability.

Then you cannot close an oil depot “according to the formula” without exposing that formula.

And you cannot explain why saving 0.05% of dividends on infrastructure is supposedly more important than regional stability.

The same applies to the fuel damper.

If the model accounted not only for the “export alternative” but also for the “domestic balance,” the fuel damper would not be necessary.

But the model is built around export prices, not the domestic balance.

And this is not accidental.

It is an architectural choice.

PART VIII. THE REFINERY THAT DOES NOT EXIST: WHY DCF DOES NOT SEE ENERGY SECURITY

There is another example that perfectly illustrates the entire architecture.

The construction of a new refinery in the Far Eastern Federal District has been under discussion for years.

Yury Trutnev has been advocating for this decision. Yet the issue has remained unresolved for years.

Why?

Because calculations based on the same DCF model show losses.

The model sees no economic justification for building a refinery if it cannot pay for itself within 15–20 years under current prices and tax conditions.

The same argument was used in 2006–2007, when LUKOIL evaluated a refinery project in Torzhok.

The project was deemed inefficient according to the formula. This was compounded by unstable investment and fiscal policies.

The refinery was never built.

And here the central question emerges:

What objectives is the state pursuing when it manipulates taxes?

A 2016 graduation project documented the following:

“Over six years, the industry’s basic taxation parameters changed 24 times.”

This fact was acknowledged at a meeting of the Board of Directors of PJSC LUKOIL.

Twenty-four changes in six years.

This is not “fine-tuning.” It is manual control.

And it is direct evidence that a risk management system is absent.

Each of these changes was introduced to “adjust something” — increase budget revenues, close a deficit, support exports, or contain prices.

But none of them was integrated with the country’s energy security as a fundamental objective.

Because energy security is not part of the DCF model.

The model calculates money. It does not calculate the risk that a drone might strike a refinery tomorrow, leaving an entire region without fuel.

It does not calculate the risk that demand will increase in ten years while the infrastructure required to meet it no longer exists.

And the problem is not limited to risk.

The 2016 graduation project directly documented that forecasts from the EIA, WEO, and OPEC systematically failed to match actual prices.

In other words, companies may become unprofitable not because oil is cheap, but because their formulas do not work.

As one of the people featured in the project put it:

“An unresolved task becomes a problem.”

Today, we can see how the unresolved task of building a refinery in the Far Eastern Federal District has turned into an energy security problem for an entire region.

And all these tax manipulations are attempts to patch a hole rather than build a new ship.

PART IX. 24 CHANGES IN 6 YEARS AND 15 MORE IN THE NEXT 6: THE CHRONICLE OF MANUAL CONTROL

The 2016 graduation project contains a table that strikes at the heart of the issue.

At a meeting of the Board of Directors of PJSC LUKOIL, the following was acknowledged:

“Over six years, the industry’s basic taxation parameters changed 24 times.”

Twenty-four changes over six years (2011–2016).

This is not “fine-tuning.” It is manual control.

And here is what matters: six of the 15 changes introduced over the following six years (2020–2026) concerned the fuel damper itself.

Every year — another adjustment.

If there were 24 changes in 2011–2016 (an average of four per year), then there were at least 15 major changes in 2020–2026.

The pace has not slowed.

The system continues to operate in a state of constant manual intervention.

Here are those 15 changes:

• 2020: Tax maneuver in the petrochemical sector (reverse excise on LPG and related adjustments).

• 2021: Introduction of the fuel damper in its current form.

• 2021–2022: Fuel damper adjustments (payment restrictions and threshold shifts).

• 2022: Introduction of a tax deduction under the mineral extraction tax to stimulate processing.

• 2022–2023: Introduction and subsequent cancellation of export duties on crude oil and petroleum products.

• 2023: Changes to fuel damper parameters (adjustments to benchmarks and thresholds).

• 2024: A 1.5% increase in the mineral extraction tax rate (to compensate for lost revenue resulting from fuel damper payments).

• 2024: Cancellation of exchange-rate-based export duties.

• 2024: Introduction of an additional mineral extraction tax surcharge on crude oil (to finance the fuel damper).

• 2025: New fuel damper parameters (benchmark adjustments for 2026–2028).

• 2025: Introduction of reverse excise on gasoline and diesel.

• 2025: Changes to the additional income tax regime for new oil fields.

• 2026: New fuel damper formula (higher benchmarks: RUB 66,350 per ton for AI-92 gasoline, etc.).

• 2026: Introduction of a new excise tax (effective January 1, 2026).

• 2026: Introduction of new thresholds for zeroing out fuel damper payments (RUB 79,620 per ton).

This is not reform.

It is a chronic disease — the absence of a risk management system.

And until energy security becomes a fundamental objective, taxes will continue to change again and again, while the refinery in the Far East will remain unbuilt.

And if oil falls to $10–20 per barrel tomorrow, the DCF models used to calculate losses will finally collapse.

Then we will see that a loss is not economics.

It is mathematics that does not work.

PART X. A NEW FISCAL PROSTHESIS: BILL NO. 617-9 ON REVERSE EXCISE FOR REFINERIES

Now let’s look at a fresh example of how “manual control” continues — this time not through the fuel damper, but through reverse excise on crude oil feedstock.

The State Duma has passed a government bill (No. 617-9) in its first reading. The bill tightens the requirements for receiving reverse excise benefits: the gasoline production requirement will have to be met by each oil refinery individually.

Currently, under paragraph 15 of Article 179.7 of the Tax Code, tax authorities revoke a crude oil processor’s certificate if the share of AI-92 gasoline and higher sold in Russia, together with straight-run gasoline directed to petrochemical production, falls below 10% of the volume of processed feedstock.

This share is assessed at the end of each quarter, half-year, nine-month period, or calendar year.

Without the certificate, a company cannot receive the excise tax deduction.

Currently, the indicator is calculated across the entire company. The bill requires it to be calculated separately for each refinery.

“The ratio provided for in this subparagraph shall be determined separately for each oil refinery,” the proposed amendment states.

The amount of reverse excise depends, among other things, on the SPyu coefficient (Article 193, paragraph 8 of the Tax Code), which reflects the structure of products manufactured from the feedstock.

The explanatory note identifies minimizing the risk of budget revenue losses caused by overstating the SPyu coefficient as one of the bill’s objectives.

The bill establishes that vacuum gas oil, tar, and fuel oil produced by a company holding a processor’s certificate will be recognized as crude oil feedstock only if the company itself accounted for them as dark petroleum products when calculating the SPyu coefficient.

The procedure for accounting for processed products when calculating the coefficient is also being changed.

If adopted, the provisions will enter into force on January 1, 2027.

What this changes in the logic of the “two accounting systems”

At first glance, this is a technical amendment.

But within the architecture we are examining, it changes three things at once.

First. Another step away from the “company” and toward the “refinery.”

Previously, a company could balance its figures: one refinery could “pull up” the gasoline indicator, while another contributed through its dark petroleum products. The certificate and tax deduction were assessed at the company level.

Now every refinery must independently meet the 10% requirement.

For companies with different refining structures, this means either additional investment in gasoline production capacity or losing the deduction at individual refineries.

In other words, fiscal logic is once again being pushed down to the asset level — but not to make the chain visible. It is being done to close a hole in the budget.

Second. This is once again about the SPyu coefficient, not energy security.

The SPyu coefficient reflects the structure of petroleum products.

Overstating it creates a risk of budget revenue losses.

The bill explicitly identifies minimizing these risks as one of its objectives.

But neither the explanatory note nor the amendment contains any criterion related to:

• Sufficient capacity to supply the domestic market.

• The resilience of regional fuel supplies.

The issue is preventing companies from overstating the coefficient and receiving excessive tax deductions.

This is a fiscal adjustment, not the construction of a refinery in the Far East.

Third. Another “manual adjustment” in the same series.

We have already counted 15 major changes between 2020 and 2026.

Bill No. 617-9 is effectively the 16th.

It does not create an automatic mechanism. It changes the calculation rules and introduces them from January 1, 2027.

Once again: manual intervention, another shift in parameters, another attempt to patch a hole.

And once again, energy security is absent as a fundamental objective.

Recalculating the refinery-level economics: what changes in the arithmetic

Let’s recalculate the logic using an example.

Suppose a company operates several refineries, and its average share of AI-92 gasoline and higher, together with straight-run gasoline directed to petrochemical production, is 12% — above the 10% threshold.

However, at one refinery the figure is 7%, while at another it is 17%.

Previously, the company would have passed based on its overall average.

Now the refinery with a 7% share would fail the requirement. Its processor’s certificate could be revoked, and the company would lose the corresponding excise deduction for that facility.

This means the economics of an individual refinery change:

• A refinery with a low gasoline share is no longer simply part of the company’s overall balance. It becomes an independent fiscal risk.

• The company must evaluate additional investment in gasoline production capacity.

• Alternatively, it may consider closing or repurposing the facility.

And here the same question arises as with oil depots:

What is cheaper — investing in additional gasoline production capacity at that refinery or closing/repurposing it?

In a DCF model, it will once again appear as a “cost center,” rather than an “element of energy security.”

And here is the central paradox.

The state tightens the rules to minimize budget losses.

Companies recalculate their projects to avoid losing tax deductions.

But nobody in this formula calculates what will happen to regional fuel supplies if a refinery fails the requirement and reduces production.

This is not included in either the budget model or the corporate model.

Once again, it remains outside the brackets.

CONCLUSION: THE QUESTION I WILL LEAVE OPEN

The numbers do not lie.

They simply sit in different accounts.

• The fuel damper — on the budget’s accounts.

• Dividends — on shareholders’ accounts.

• Oil depots closed in various regions — in reports describing “optimization.”

Meanwhile, gasoline in Khabarovsk is sold at a price that reflects not the distance to a refinery, but the limits of storage capacity and the system’s inability to smooth out peak demand.

And there is another account.

A refinery in the Far Eastern Federal District that does not exist.

A project that fails the DCF test.

Twenty-four tax changes over six years.

And another 15 over the following six years.

Plus Bill No. 617-9, which, from 2027, introduces an individual gasoline production requirement for every refinery.

For existing refineries, this means a choice: invest in additional gasoline production capacity or reduce refining operations.

Once again, the decision is not made according to the criterion “Does the region need this refinery?” but according to the criterion “Does the refinery pass the formula?”

This is not reform.

It is manual control.

And it is direct evidence that a risk management system is absent.

The question: if “optimization” reduces infrastructure but increases management bonuses, is this efficiency or redistribution?

And a second question: if the state changes taxes 24 times in six years and then tightens reverse excise requirements for every refinery individually, yet does not build a refinery in the Far Eastern Federal District because the DCF model shows losses, what national objectives are these manipulations actually serving?

The answer is not in economics.

The answer is in the architecture.

In the fact that energy security is not part of the formula.

And until it becomes part of that formula, we will continue counting pennies while losing billions.

The fuel damper will remain a manual fiscal prosthesis that does not cure the problem but merely replaces a missing organ.

And if oil falls to $10–20 per barrel tomorrow, this prosthesis will finally break.

There will be no replacement.

Because the DCF models used to calculate losses do not work either.

And then we will see that a loss is not economics.

It is mathematics that does not work.

Chloe Magurskaya. Mystique of Systems.

This analysis is provided for informational purposes only and does not constitute investment advice. The material is based on publicly available data and archived publications. Original source of the benchmarking methodology: InfoTEK magazine, No. 1 (2011), pp. 46–50. Data concerning Bill No. 617-9 are based on State Duma materials and the explanatory note; the bill was submitted on September 30 as part of the budget package.