BELARUS DIGEST

The Russia-Belarus oil disputes continues as Belarus authorities struggle to retain a larger share of the duty-free oil imports. However, Russia seems to be determined to keep a larger share of the pie despite the reputation damage, which the dispute has already caused. The duty-free oil shop is likely to remain open only for Belarusian domestic customers, but no longer for those re-selling Russian oil to the West.

Yesterday, Vladimir Putin’s press secretary Dmitry Peskov urged not to throw flames on Russia-Belarus oil talks. But he explained on the pages of the Washington Post that Russia is determined to cut the luctative oil refining business of the Belarus regime:

The so-called “dispute” between Russia and Belarus is in reality an ongoing negotiation between supplier and customer. For years, Russia subsidized Belarus by providing deep discounts for oil. This discounted oil was used not only for Belarus’s domestic needs, but considerable amounts of it were refined in Belarus and exported to European markets at the real market price.

Although Belarus and Russia continue to declare that the dispute will not affect deliveries to Europe, there are serious reasons to worry. According to Reuters, Russia has already told oil firms to re-route some flows scheduled for Belarussian refineries to the Polish port of Gdansk as Moscow and Minsk struggle to agree a new supply deal.

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Russia continues to cut subsidies to Belarus economy. This time, it has reached the lucrative oil refining business, which had already been hit by the US sanctions. Belarus inherited from the Soviet Union two large oil refineries – one in Navapolatsk and the other one in Mazyr.

According to Russia, Belarus enjoyed duty-free prices for oil and its derivatives, intended both for domestic use and transit. In 2010 n only oil for domestic consumption can be exempt from duties. This is something the Belarus Government is strongly opposed to.

According to analysts, after Russia cut crude supplies to Belarus oil prices hurdled 80 dollars a barrel on the first trading day of the year Monday. The move will certainly worry Europeans, who still remember natural gas wars between Russia and Ukraine. At some point left several eastern European cities were left without gas for days. But, as the Financial Time notes, oil is more fungible than gas and easily made up with alternative suppliers, so the consequences of the dispute are unlikely to be as severe. Here is the Belarus position:

On January 1 a spokesman for the Belarus government told Interfax news agency that “unprecedented pressure” had been put on their delegation during the negotiations. Minsk called on Russia to continue supplies to Belarus under the old terms, until a new agreement could be reached.

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