BELARUS DIGEST

According to the deal, Russia will deliver 6.3 million tons of oil to Belarus duty free this year. This is exactly the amount Moscow had promised at the beginning of negotiations. Russia agreed that Belarus will raise oil transit costs by about 11 percent.

It turned out, that despite announcements of Belneftekhim to the contrary, the Russian side indeed suspended supplying oil to Belarusian refineries at some point.

Apparently, the issue of oil duties has been linked to other projects, such as building the nuclear station in Belarus. However, full details of the deal has not yet been disclosed. According to the Financial Times:

Mr Sechin said Russia would allow Belarus to continue paying a favourable tax rate on oil supplied for its domestic needs in 2010. It was not clear how much tax Belarus will pay on oil it re-exports after processing in its own refineries.

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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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