Due to absence of oil supply agreement Belarus’ forecast for 2017 could be failed
Belarus is attempting to reintroduce higher tariffs on the Russian oil transit as an argument in the gas and oil dispute with Russia. Financial and reputational losses from the dispute have already exceeded the benefits from the conflict prolongation, and the absence of solution may lead to problems with the implementation of Belarus’ development plans for 2017.
Belarus intends to increase transit costs for the Russian oil through Belarus in 2017 by 20.5%. This step is yet another attempt to resolve the oil and gas dispute with Russia. Due to incomplete procedures regarding additional terms to the new agreements on gas supplies (the price of natural gas for Belarus may be reduced from USD 136 to USD 100 per 1000 cubic metres) and the lack of due payments for previous deliveries (USD 300 million in total), Russia carries out reduced oil supplies to the Belarusian refineries.
Belarus’ attempt to increase the transit tariff is yet another attempt to strengthen the negotiating position in the dispute with Russia over the terms of gas and oil supplies. As regards oil, Russia insists on the compliance with the commitments on counter-supply of gasoline and the reduction in tariffs for processing Russian oil, and Belarus - on reducing prizes for Russian companies for the oil supply. In early October 2016, Belarus unilaterally doubled the oil transit tariff. In a week, the parties reached an agreement on the terms of debt repayment, after which oil supplies would be resumed in the higher volume. As of early November 2016, the debt was still circa USD 300 million, i.e. Belarus did not confirm the intention to repay the debt with a transaction, hence, Russia did not resume the oil supply in set volumes.
The only advantage for Belarus to delay the payment for gas is that it preserves her international reserves. As of November 1st, 2016, Belarus’ international reserves totalled USD 4.8 billion. In order to meet commitments within the credit programme with the EFSR, as of January 1st, 2017, Belarus’ international reserves should be at least USD 4.9 billion. Amid negative trends in Belarus’ international trade, if she makes the payment of USD 300 million, she may be unable to meet the EFSR requirement on the key date, which may lead to the suspension of the remaining tranches. Due to curtailed oil supply to Belarus, Russia may save circa USD 400 million (an equivalent of 5 million tons of oil), while Belarus will lose a lion’s share of foreign exchange earnings. In addition, her ability to mitigate rouble exchange rate fluctuations will be reduced, and she will suffer reputation losses as a consumer country, which does not pay for the delivery of products at prices below market rates.
Further delay with the settlement is likely to delay the resumption of oil supply in agreed volume, to lead to budget losses from uncollected petrochemical duties, to reduce petrochemicals production, and finally, Russia may adjust possible compensation for gas supplies. As a result, Belarus’ forecast with 1.7% economic growth in 2017 could be in jeopardy and the currency shortage may prompt the authorities to search for additional sources to service the increased public debt in 2017.
Overall, the transit tariff for Russian oil is one of the few arguments Belarus can use to improve her position in the oil and gas dispute with Russia. Belarus is prompted to find additional external sources to repay the gas debt, so as the delay with the settlement of the oil and gas dispute could derail Belarus’ socio-economic development plans in 2017.
Yet the Belarusian authorities have not taken any action to prevent massive protests against the decree on ‘social parasites’. On February 26th, 2017, multiple protests against the decree were held in three Belarusian regions in Vitebsk, Baranovichi, Brest and Bobruisk (more than 4 000 people participated in total). Very likely, the authorities, on the one hand, anticipate that the decree will be abolished, and other hand, do not want to take responsibility for decisions either on the decree or on the protests.
It should be noted, that the mass street protests on February 17th, 19th, and 26th, were held in the absence of the president in the country. There are reasons to believe that the authorities did not expect such a massive action. The state propaganda responded tangentially, insisting that protests were unjustified, because ‘the state did not require a lot’, despite the fact, that the protesters primarily complained about the lack of jobs in the country. In addition, the protesters pointed to the unfairness of the requirement to pay the tax for being unemployed as the state could not provide job and money making opportunities, while people were humiliated by the need to prove to the state they were unable to pay the tax.
In the past ten days, there were several protests against the decree, which were characterised by the following: the protesters easily picked up anti-Lukashenka slogans; they eagerly shared their outrage with journalists; many protesters said it was their first time when they took to the streets; protesters were ‘common people’, i.e. not political activists; there were fewer white-red-white flags during these protests than during conventional oppositional actions; politicians, who organised protests (eg on February 26th, by the centre-right coalition and the independent trade union) did not attempt to take the lead, especially in the regions. All this gives a picture of truly popular protests.
While refraining from interfering with the meetings and protest marches, the militia on February 26th attempted to put pressure on the protest organisers in the regions by handing out reports on administrative violations after the events. Other than that, it appears that the local and central authorities are unable to respond to the massive protests against the Decree No 3, including crowded street speeches, numerous signatories of petitions (over 80 000), multiple collective and personal appeals to the authorities, and mass meetings.
That said, the authorities are unable to enforce the Decree No 3 as they do not have sufficient resources to trial some 400 000 people for non-compliance. In addition, the authorities do not have sufficient institutional capacity to exempt all those not liable for the tax from the mailing lists of the Tax authorities. The Belarusian Bar Association will provide free legal consultations on March 1st, 2017 for those wishing be exempt from the tax imposed by the Decree No 3, however, this would only slightly east the tension in society.
In addition, despite concerns expressed by some experts and the leader of the protest in Minsk on February 17th Mikola Statkevich, there were only scarce reports in the Russian media about the protests in Belarus.