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8 Nov 2012

Fight and then reconcile

Oil dispute between Belarus and Russia

The problem of Russian oil delivery to Belarus in the fourth quarter seems settled. On November 2 meeting of the Council of Ministers of Belarus First Vice Premier Vladimir Semashko, who just returned from Moscow, said that Belarus should receive 5.3 million tons before the end of the year, and the annual volume of imported oil is expected to reach 21.5 million tons, as provided the fuel and energy balance of the Union State of Belarus and Russia. However, the issue of oil supply in 2013 is not yet resolved.


The Deputy Minister of Energy of the Russian Federation Pavel Fedorov, commenting after Semashko, called another number. According to him, oil deliveries to Belarus in the IV quarter will be around  4.8 million tonnes.

"At the moment we really conclude negotiations with Belarus on oil and oil products in the fourth quarter of this year - the official told journalists in Moscow on November 5. - Achieved a high level arrangements allow us to talk about supply about 4.8 million tonnes of oil in Belarus as a whole for the quarter and the reverse supply 200,000 tons of gasoline. "

"The higher the numbers, unfortunately, are not supported by technical constraints of pipelines and will require increasing the inverse supply of petroleum products," - said Fedorov.

He stressed that "even this increase oil supply in view of already five weeks of the quarter is extremely significant," and shows that Russia is ready "to find solutions with full consideration of long-term strategic relationship with Belarus."

Moscow has previously announced its plans to cut oil supplies to Belarus in the IV quarter from 5.3 million to 4 million tons.

In October, according to Russian statistics, Belarus received 1 million 347 thousand tons, or 22% less than in September.

Reduction in the supply came in response to a dodgy "solvent" business, in which the Belarusian side was actively engaged in the first half of 2012. The essence of it is that the oil produced in Belarus from Russian raw materials was exported to Europe under the guise of thinners and solvents, which are not subject to export duties.

Because this duty was to come to the Russian budget, Moscow has missed a large amount. Initially, experts estimated the damage at $2 billion. Now Russia  requires around $1.5 billion in compensation for lost taxes.

Has this problem been resolved - is unknown.

It is noteworthy that the Belarusian side has not broken any law: thinners, solvents, and lubricants are not included in the list of petroleum products, the export of which to pay the fee.

Knowing this and wanting to protect itself from such actions of its closest ally, Russia in September, made to the board of the Eurasian Economic Commission documents regulating relations in the sphere of production of solvents in a single customs territory.

Moscow proposes, in particular, to classify as different mixtures of petroleum oil with alcohol, of which gets thinner and thinner, to be able to assess their export duty.

According to unofficial information, Belarus blocked Russia offer.

According to economic analyst Tatiana Manenok, it could be because the Belarusian side has required additional expert evaluation of the Russian proposals.

"I must say, offers are  quite tough. They not only focus on the elimination of all "solvent business”. Belarus has because they might have problems with the supply of oil products to the domestic demand for petrochemicals and are not a basis for diluents, solvents," - said the expert in the comment to BelaPAN.

Russian proposals were ignored in their mode of processing petroleum products, which are produced in one of the vehicles, and the export of which export duty is paid.

"For example, Belarus will not import from Russia diesel fuel for its further processing - says Manenok. - It is known that Russian diesel fuel is of rather low quality. A Mozyr Refinery has recently built plant, which after processing produces better petroleum products."

"I think that the Belarusian side has matured understanding that the solvent business" is bad practice and under it to draw the line," - said the expert.

Thus, in its view, Belarus will never agree to a complete ban on imports of petroleum products from Russia, because it is aimed at the domestic refinery capacity.

"It should also be borne in mind that half the amount of oil imported Russian companies, processing it into Belarusian conditions - emphasizes Manenok. - They have their own programs and objectives that they have adapted their logistics to new working conditions. Belarus is tailored to their needs rather attractive, so they are likely to be lobbyists resume oil supplies to the full. "

As for Moscow's consent to increase oil deliveries to Belarus in IV quarter, this may be due to the political and defense interests of Russia, suggested Manenok.

She drew attention to the fact that on October 31 and November 1 in Moscow, Vladimir Semashko met with the Deputies  Prime Minister Arkady Dvorkovich and Dmitry Rogozin.

On October 23  Dmirty Rogozin attended the meeting in Minsk Working Group on cooperation of military-industrial complex (MIC) of Belarus and Russia. Semashko and Rogozin signed the program of cooperation in defense industry between the two countries for the period 2012-2015.

"Probably, Rogozin has helped solve the problem of increasing the supply of oil to Belarus this year", - says Tatiana Manenok.

As for compensation of 1.5 billion dollars, which Russia expects from Belarus, to prove the guilt of the Belarusian side will not be easy, he said.

"Formally, the charges may be present, but there is no legal basis for this. Yes, there is a hole in the law, and traders used it. But to prove that and how and violated Belarus will not be easy," - says the analyst.

In addition, it should be noted that in this business were involved not only Belarus, but Russian oil traders as well. So the responsibility for unfair business does not only lie on the Belarusian side, the expert said.

In any case, the parties are interested in reaching a compromise on all contentious issues related to the supply of oil, Manenok said.

"Main priorities for Russia are still the same: The Custom Union and then The Eurasian Economic Union. Therefore conflict with the closest ally of Moscow will not benefit the projects" - said the expert.

Belarusian leadership, for its part, understands there is no alternative to favorable conditions of oil supplies from Russia. "These conditions have allowed our refineries operate at a profit, so Belarus will do anything to save them," - says the analyst.

In December there will be a regular meeting of the Government of the Union of Belarus and Russia. Traditionally, at the end of each year, the sides will approve fuel and energy balances for the next year. So waiting  for the outcome of the oil story remains not that long.

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