Change Management in Russian Oil and Gas Industry Amidst the COVID-19 Pandemic: The Impact of Tax Incentives

The COVID-19 pandemic presented an unprecedented challenge to global economies, forcing businesses to rapidly adapt to changing circumstances. This study focuses on the Russian oil and gas industry, a sector critical to the nation's economy. Before the pandemic, the Russian government prioritized maximizing tax revenue from this sector. However, the pandemic highlighted the need for environmental sustainability and decarbonization. This shift in national priorities led to a novel policy approach: tax incentives to encourage environmentally responsible initiatives within the oil and gas industry. This research questions whether these tax incentives significantly improved the sector's readiness for change compared to other economic sectors less affected by these specific policy changes. Understanding the impact of these incentives is crucial for informing effective policy interventions to bolster economic resilience in the face of future crises. The study aims to analyze the effectiveness of this policy approach and explore its implications for broader change management strategies in Russia.

Existing literature extensively documents the economic and healthcare impacts of the COVID-19 pandemic. Studies have explored the effects on various industries, focusing on adaptations to social distancing, shifts in consumer demand, and workforce challenges. However, few studies have specifically examined the effect of targeted tax incentives as a mechanism to drive change management within a specific industry during a major crisis. This study bridges this gap by analyzing the unique case of the Russian oil and gas sector and the introduction of tax breaks for the adoption of best available technologies.

The study utilizes a Difference-in-Differences (DiD) method to isolate the effect of tax incentives on the readiness for change within the Russian oil and gas industry. The DiD approach compares the change in readiness for change in the oil and gas sector (treatment group) with that of other sectors (control group) before and after the introduction of tax incentives. Data on the readiness for change was collected through a survey of oil and gas companies, measuring the degree to which companies adapted to the changed circumstances during the pandemic. This survey also assessed the change in the tax burden before and after the implementation of the tax incentives for companies that switched to the 'best available technologies'. Data on other sectors' readiness for change was also gathered. Table 3 presents the DiD results, showing the isolated impact of tax incentives while accounting for the overall effects of the pandemic across all sectors. This quantitative analysis allows a direct comparison of the effect of the tax incentives with the pandemic's general effect. The study uses a quantitative approach, analyzing data gathered from the Institute for Scientific Communications. The quantitative analysis is supplemented by a qualitative discussion to understand the context and implications of the findings.

The DiD analysis reveals that tax incentives significantly increased the readiness for change within the Russian oil and gas industry. The readiness score increased by 2.72 points, compared to only 0.73 points attributable to the pandemic's overall impact. This indicates that the tax incentives played a dominant role in driving adaptation within the sector. In contrast, other sectors experienced a smaller increase in readiness to change (0.73 points), mainly due to the pandemic's general effects. The survey results showed a 15% decrease in the tax burden for oil and gas companies that adopted 'best available technologies'. These findings support the hypothesis that targeted tax incentives can be an effective tool for accelerating change management, particularly within industries crucial for national economic objectives. Further analysis in the paper identifies three main impacts of social drama amid the unfolding pandemic: a deficit caused by social distancing, a deficit resulting from changing consumer demand, and a social crisis in the labor market. The study also investigates the effectiveness of governmental responses to these impacts and proposes additional change management measures to mitigate negative consequences.

The results strongly suggest that targeted tax incentives can be an effective policy instrument for promoting change management in strategically important industries during times of crisis. The significant difference in the readiness for change between the oil and gas sector (with tax incentives) and other sectors (without) emphasizes the influence of these incentives. This underscores the importance of considering such policies in broader economic planning, not just during emergencies. The finding that the increase in readiness was substantially larger due to tax incentives compared to the pandemic's general impact highlights the effectiveness of this targeted approach. The findings contribute significantly to the understanding of how policy interventions can facilitate rapid adaptation within industries facing disruptions. The limitations of the study should be considered: The study focuses on a specific geographical region and industry, limiting the generalizability of the findings to other contexts. While the DiD method accounts for some confounding factors, other unobserved factors may also influence the results.

This study demonstrates the effectiveness of targeted tax incentives in driving change management within the Russian oil and gas sector during the COVID-19 pandemic. The substantial positive impact of tax incentives, exceeding that of the pandemic's general effect, underscores the potential of this policy instrument. The findings advocate for extending similar incentives to other sectors to enhance overall economic resilience and the adoption of best available technologies. Future research could explore the long-term sustainability of these changes and the potential for similar interventions in different economic and political contexts.

The study's reliance on survey data limits the generalizability of findings. The focus on a specific industry and geographical area might limit the broad applicability of the study's conclusions. The study did not fully address all factors influencing change management, so the effects of other factors may be underestimated. While the DiD method helps control for confounding factors, some unobservable factors may still influence the results. Future research should address these limitations to strengthen the robustness of the conclusions. The specific design of the tax incentives and the context of Russia’s economic and political landscape might also limit the transferability of findings to other national settings.