Belarus to Diversify Away From Russian Oil Supplies

A bit of sensational news came today in the morning: starting May, Belarus will daily buy 80,000 barrels of oil from Venezuela. According to media reports, this number is comparable to the current amount of agreed duty free Russian oil supplies (6.3m tons per year, i.e. 130,000 barrels per day). Before the crisis, annual Russian oil supplies to Belarus were between 20 million and 25 million tons. Own oil production in Belarus is less than 20,000 barrels per day.

The news came just before the visit of Russian PM Vladimir Putin to Belarus. Being on the visit to Venezuela, president Aliaksandr Lukašenka will avoid meeting Putin in Minsk. Obviously, the agreement with Venezuela is a means to demonstrate readiness to at least partly diversify oil supplies if Russia is to cancel or cut duty free oil exports to Belarus. Lukashenka's visit to Venezuela is aimed to strengthen Belarus' position in new negotiations with Russia. Belarus aims to include duty free oil supplies into the conditions of the Russian-Kazakh-Belarusian customs union.

Logistics is a question arising immediately: the oil will have to be transported from Venezuela on oil tankers (80,000 barrels is approximately the size of a small tanker), then pass customs in Lithuania (oil terminals of Klaipėda or Būtingė) or Latvia (Ventspils) and be transported to the Belarusian refineries in Navapolack via pipelines. It is theoretically possible to realize the scheme, but it won't be an easy thing to do. The price of the oil supplied is not reported, but it has to be quite low for the scheme to be profitable for Belarus. A joint Belarusian-Venezuelan oil company is winning approximately 1m tons of oil annually. The oil supplied from Venezuela will be refined in Belarus for the products to be exported to Western Europe. Export of oil products to Western Europe has been a key source of income for the Belarusian state budget in the last decade.

Cheap Russian oil supplies have been the key factor of competitiveness of the Belarusian refineries. Except oil supplies, an other problem for Belarus is selling off production of its tractor and other machine works. Aliaksandr Lukašenka and Hugo Chávez have agreed that Belarus will construct machine building works in Venezuela and create a trading house in order to facilitate sales of Belarusian goods to whole Latin America. Apparently, the only thing president Lukašenka dislikes about Venezuela is that it is located so far from Belarus.

 

CARACAS (Dow Jones)--Venezuela in May will start selling 80,000 barrels of oil a day to Belarus, the South American nation's president, Hugo Chavez, announced Monday. Venezuela's leader made the announcement following a meeting in Caracas with Belarus President Alexander Lukashenko, who was in town to sign a variety of bilateral accords. In a statement, Chavez said the agreement to supply Belarus with petroleum will be signed "in the coming hours." According to the statement, Lukashenko said the plan is for the two countries to also refine Venezuelan oil together and eventually sell oil products throughout Europe. // WSJ

Read also stories at People's Daily, RFE/RL, Belorusskie novosti (Russian), Gazeta.ru (Russian)

Alexander Čajčyc is a PhD candidate at the Financial University under the Government of the Russian Federation in Moscow.

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