Russian petrol price seen capped till 2008 election

MOSCOW May 2 (Reuters) - Russia's major oil firms will keep a lid on petrol price rises this year despite rising wholesale prices in order to avoid irritating the Kremlin before the 2008 presidential elections, traders said on Wednesday.

Russian wholesale petrol prices rose 15-20 percent in April, when domestic crude prices surged 25 percent, traders said. But the trend is unlikely to carry over to the retail market during the politically sensitive pre-election period.

Russia is to choose a new president in March 2008, when the constitution says President Vladimir Putin must step down.

"We clearly remember last year's call (not to increase petrol prices) by (Economy Minister German) Gref and his threat to introduce state control over the prices if they go up sharply," said a trader in a major oil company.

"And now they are watching the situation even more intently because this is a pre-election year," he added.

Last year, the government, concerned by the spike in local fuel prices, called on oil companies to curb price growth or face investigation for anti-competitive behaviour.

In 2006, petrol prices rose by 11 percent in Russia, the world's second-largest oil exporter, and outpaced prices in the United States, the world's largest crude oil importer.

Prices stopped rising at the end of last year and have barely changed for the last six months, standing at 17.72 roubles ($0.690) per litre in mid April.

Big oil firms, which control the whole chain from production to retail stations, are in a better position than retailers to comply with self-imposed retail price limits, since majors can recoup lost profits on the wholesale market, traders said.

"For big oil companies, retail is a social welfare project. They get their share at the wholesale market," said a regional retailer. "It would be even better for them if we go bankrupt and they will be able to buy us cheaply."

But some retailers say they can increase prices if the market dictates so.

"We can see now that demand is growing, especially for high-octane gasoline. So we can't exclude that our prices could follow the market," said another trader. He did not specify how high the rise could be and when the prices could go up.

Major oil companies control more than 30 percent of Russia's retail market. The remaining petrol stations are controlled by independent retailers.