Parade of discounts: how much to pay Russia for a new compromise with Lukashenko

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In the next three years the Russian subsidies to the Belarusian economy will decrease by a third compared to the 2013-2015 years, but still will amount to $11.6 billion

The energy conflict between Russia and Belarus, which ran the last 15 months, received an unexpectedly quick resolution after a meeting of heads of state. The results of the negotiations, the observers have left the mixed impression: after the restriction of oil supplies from Russia, threats of Minsk sharply to raise tariffs for oil transit, claims, poured out by Alexander Lukashenko in Moscow during the February hours of the conference, now from Russia to Belarus again spilled a Golden rain. What was it? Let’s deal.

Hooked on subsidies

The origins of the conflict lie in the collapse of the Belarusian economic model. “Belarusian economic miracle” is left somewhere in the mid-2000s, the country is firmly hooked on Russian energy subsidies, which by any measure are measured in tens of billions of dollars. Non-oil exports were and remained tied to the Russian market — 88% of export of food products and 69% of exports of engineering in 2016 was sent to Russia.

Most visible here are not percentage points of GDP decline (cumulatively by 6.3% in 2015-2016), and the dynamics of the sectors, the former pride of the authorities of Belarus. For example, the production of trucks fell four times — from 26.2 thousand in 2012 to 6.2 million in 2016. Has not worked and attempts to revive the Soviet myth about the Assembly hall for Union. The production of television sets, for example, over the last ten years has fallen from 1.3 million to 169 thousand And the notorious $500 salary and the money that is still “need to earn” the average salary in 2016 amounted to only $363.

Looking for quick crisis management solutions, the choice fell on Russian gas. The occasion was a low decrease in the contract price for 2016 by only 5%, to $132,8 per 1 thousand cubic meters, for which the differential with the European countries fell sharply, which, in the opinion of the Belarusian side, was unfair (and to be fair it was before, in 2012-2014, when the difference was up to $260 for 1 thousand cubic). Appealing to a fair price of $70-80 per 1 thousand cubic meters, the Belarusian company unilaterally reduced the level of payment. The actual level of payment, in my estimation, was last year about $110 for 1 thousand cubic meters.

Oil and gas sanctions

In further negotiations, the main stumbling block was a debt that the Belarusian side refused to recognize. The Russian side was ready to provide a discount on gas after debt — a precedent for the recognition of a unilateral revision of the price was for “Gazprom” is unacceptable.

Limitation of gas supplies was fraught with significant political and image losses, and the resolution of the dispute to the legal plane between the two Belarusian companies (Gazprom and “Beltransgaz”, which continued to import gas at the contract price, and sales of the Belarusian monopolist “Beltopgaz concern”) could be delayed indefinitely.

To stimulate the negotiations, the Russian government has limited the supply of oil to Belarus. The gain of the budget of Russia from supplying nearly 7 million tons of oil to other countries (from July 2016 to March 2017) at the expense of levying export duty on oil amounted to $610 million, which was comparable to the lost revenue of “Gazprom” — at the end of March 2017, the company said it had debt of $726 million

It should be noted that the processing of Russian oil is one of the pillars of the Belarusian budget. Belarus imports Russian oil at a reduced cost — net of export duties. In 2014 Poland, for example, imported Russian raw materials close to $700 per ton, and Belarus — only for $337, receiving a net subsidy for each ton of oil at $226 (part of the difference was returning to the Russian budget in the form of duties on export of oil products). In the end, only in the last five years net losses of the Russian budget from duty-free oil supplies to Belarus made up $19 billion.

To reduce subsidy of oil refining in Russia and Belarus (and also for the exclusion of various schemes of re-export of Russian petroleum products) Russian Ministry of Finance initiated tax reform, implemented through the increase of met and decrease of export duties on oil and oil products.

Belarus, of course, protested and received a bonus for a change in the tax regime — the right to keep all fees from the export of petroleum products. Tax maneuver, and then falling oil prices and, accordingly, export taxes have reduced the volume of Russian oil subsidies to Belarus, but they are still very significant. In 2015, the Belarusian budget has received $1.3 billion in export duties on petroleum products (9% of revenues of the consolidated budget of Belarus), in 2016 — $0.6 billion (8%).


In anticipation of the April meeting of the presidents of the relationship was bad as ever. Belarus even bought a small batch of Iranian oil trying to demonstrate energy independence. However, the current technical level of the Belarusian oil refineries involves the loss of $20-30 in the processing of each ton of Iranian oil.

Perhaps the wave of social protests that swept through Belorussia, and became the best tool for negotiations. Themselves the outcome of a compromise: Belarus agreed to recognize the debt for gas in full, but it will be repaid, apparently, at the expense of another concessional loan of $1 billion. in addition, resumed lending to Belarus from the Eurasian Fund for stabilization and development in the amount of up to $600 million In this Fund at 88% is filled at the expense of the Russian budget. The latter is particularly significant — lending was previously suspended, as Minsk has violated almost all Fund requirements (for example, privatization).

Changing the terms of oil supplies, possible re-export 6 million tonnes of oil do not incur any significant additional costs for the Russian budget. Of course, the fact that these shipments is the net subsidy even after the completion of the tax maneuver with the current price of oil the fee is about $90 per ton of oil, respectively, the total losses of the budget from the Belarusian channel duty-free export of $2.2 billion per year.

In the sphere of gas supply Russia agreed to modest concessions. The price of gas in 2017 will amount to $141 per 1 thousand cubic meters and $130 for 1 thousand cubic meters Discount for 2018-2019 is not disclosed, but is unlikely to be significant and would not exceed 5-10%. Provided that the price of oil by 2019 to reach $65 per barrel, price of Russian gas for Germany will recover to $240-250 per 1 thousand cubic meters, so even at current contract, Belarus would buy gas about $100 per 1 thousand cubic meters. m below the European price, and with discounts the price will be about $140 per 1 thousand cubic meters Cumulatively over the 2017-2019 subsidies on gas supplies will amount to about $5 billion.

To sum up, for the next three years Russia will once again provide the Lukashenko regime support, but its volume is a third less than in the previous three years (us$11.6 versus $17.1 billion). To look further is unlikely — after 2019 is to be expected further change in the taxation of the oil sector, which should further reduce the subsidies for petroleum refining (reduction of export duties or the introduction of a reverse excise tax on oil).

Even greater uncertainty is the rate actually Belarus. Soviet nationalism Lukashenko is becoming more openly anti-Russian, but instead of the expected loyalty for its economic support to Russia encounters more stubbornness. Not noticing the “national turn”, the persecution of Pro-Russian journalists and juggling only in the amount of economic benefits that Belarus could receive from “neutral friendship” with Russia, the Russian authorities only repeat a mistake already made with Yanukovych. As diplomats say, “the service provided by the service is not”. And at some point Russia could be left with nothing — Russian billions vanish completely, and a backup plan, as always, no.

The authors ‘ point of view, articles which are published in the section “Opinions” may not coincide with ideas of editorial.

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