‘Comrade’ Mr. Putin

As far as many of our countrymen are concerned, the ongoing Russia-Ukraine armed conflict is something that the Philippines must stay away from. Even our own Defense Secretary Delfin Lorenzana echoed the official sentiments of our national government for the Philippines to stay neutral and leave its resolution to the United Nations (UN) as mediator to avert a full-blown war in that part of the world.

What has been complicating the conflict between Russia and Ukraine are the third-party forces led by the United States (US) and its allies in Europe and elsewhere under the umbrella of the North Atlantic Treaty Organization (NATO). As to whether the Philippines will not be drawn into this conflict remains to be seen as among the countries with military alliance with the US under an existing Mutual Defense Treaty (MDT).

Aside from the MDT, the Philippines is still considered a Major Non-NATO Ally (MNNA) given by the US to its close ally countries that have strategic working relationships with the US Armed Forces but are not members of the NATO. While the status does not automatically include a mutual defense pact with the US, it still confers a variety of military and financial advantages that otherwise are non-obtainable by non-NATO countries.

As one of the key Cabinet advisers of President Rodrigo Duterte, Lorenzana’s “stay neutral” stance reflects the government’s existing foreign and national security policies that the Philippines “is a friend to all and enemy to none.” President Duterte’s foreign policy shift has brought him in closer friendship with his counterparts Xi Jinping of China and Vladimir Putin of Russia. Proof of that warm relations with the respective leaders of China and Russia, President Duterte had more than once made state and official visits in Beijing and Moscow one after the other.

In fact, President Duterte was in state visit in Moscow when the Marawi siege erupted in May 2017. Still stung over the human rights criticisms on his administration from the US State Department in particular during those days, President Duterte procured out military hardware from Beijing and Moscow to quell the siege in Marawi. When the coronavirus disease 2019 (COVID-19) pandemic struck in early 2020, President Duterte first called out for help on Beijing and Moscow in the procurement of anti-COVID vaccines while Western produced vaccines were in short supply and limited only for their own people in Europe and in the US.

With just four months left of his term in office at Malacañang, it is but natural for President Duterte to be more cautious in getting into the fray of countries far out from within our immediate neighborhood. While the cold neutrality of the Philippines could be the better option on this renewed Russia-Ukraine conflict, it is not a guarantee, however, that it will spare us from the adverse effects, especially to our country’s economy in case of a full-blown war.

The Russia-Ukraine conflict erupts at a time the world, including the Philippines, are still on the verge of coming out of the severe economic impact of the COVID-19 pandemic.

The Russia-Ukraine conflict has been brewing for some time already and largely blamed for the volatility of crude oil prices in the global market. For the ninth consecutive week, another round of oil price hikes takes effect tomorrow. The pump price since January this year of gasoline has gone up by a total of P8.75 per liter; diesel by P10.85 per liter, and kerosene prices went up by a P9.55 per liter.

Thus, there have been renewed demands for the government to review the Oil Deregulation Law as well as the excise taxes on refined petroleum products as the immediate remedial measures sought by public transport groups as well as fisher folks using largely diesel. Operating for less than their seating capacity for almost two years already as part of anti-COVID-19 measures, public transport groups have been decrying loss of income and further being aggravated by higher diesel prices.

Last week, certain House leaders have asked President Duterte to call for special sessions of the 18th Congress to specifically take up possible amendments of Republic Act (RA) 10963, or the Tax Reform for Acceleration and Inclusion (TRAIN) Law. President Duterte signed the TRAIN Law on Dec.19,2017. Albay Rep. Joey Salceda who is the principal author and sponsor of the TRAIN Law fully agrees with the snowballing calls to amend and update Section 43 of this law. Among other things, Section 43 stated that the three-year phased period from 2018 to 2020 of the increase in the oil excise tax can be suspended if the price of crude oil in the world market breaches $80 per barrel for a period of three months.

In fact, Department of Finance (DOF) Secretary Carlos “Sonny” Dominguez III invoked this specific provision when we sought his reaction on this proposal that came out as headline news last Tuesday of The Philippine Star. Speaking before our Tuesday Club zoom conference that day, Dominguez apparently was still under the impression that Section 43 is still applicable.

“There is a law. The law says that if the price of oil is above, I think, $80 per barrel for a period of 3 months…That’s the law, okay. That was what was put in the law. So let’s just wait for the law to operate,” Dominguez retorted.

However, no less than Salceda who steered the enactment of the TRAIN Law declared Section 43 had already lapsed in 2020 when the third and final increase on oil excise tax rate was implemented. Salceda, who chairs the House committee on ways and means that passes upon all tax and tariff bills, suggested this can still be done to allow either suspend or at least reduce the excise tax on refined petroleum products during a period of extreme emergency such as massive disruption of the country’s economy. “If crude oil prices are still at $100 per barrel by March 15, President Duterte should call for a special session to consider options for the reduction or suspension of the fuel excise taxes under the TRAIN Law,” Salceda cited.

Recognized as the resident economist at the House of Representatives, Salceda pointed to the potential restriction of the flow of Russian oil to the rest of the world amid US-led calls to impose economic sanctions against Russia. With about 12% of the world crude oil supply coming from Russia, Salceda fears such disruption would seriously impact upon countries, like the Philippines, that have no stable source of imported crude oil.

The President is empowered under our country’s 1987 Constitution to issue executive fiats to amend the tax and tariff laws of the Philippines whenever Congress is not in session. Better yet, President Duterte can call up his “comrade” Mr. Putin to cool down and end his war in Ukraine.