Belarusian GDP may fall below 4% if oil and gas dispute with Russia is not resolved

Category status:
September 26, 2016 10:38

In Q4 2016, Transneft will supply 3 million tons of oil to Belarus. Compared with Q4 2015, the supplies will be halved due to the unresolved dispute over the price of natural gas supplied to Belarus. The cut in oil supplies will have a direct impact on industry, wholesale trade, and budgetary proceeds from taxes and may lead to GDP shrinking by more than 4% compared with 2015.

According to Transneft, in Q3 2016, about 3.5 million tons of oil will be shipped to Belarus and in Q4 - only 3 million tons. The overall volume of Russian oil supplies in 2016 may total only 18 million tons, which is 5 million tons less (22% less) than in 2015. The decrease in oil supplies is due to the unresolved dispute over the price of natural gas supplied to Belarus.

Since early 2016, Belarus stopped paying for natural gas supplies from Russia as she disagreed with the price. In early August 2016, overdue debt totalled circa USD 300 million. One of the largest suppliers of oil to Belarus, Gazpromneft, is Gazprom’s subsidiary. By reducing oil supplies, Gazprom is attempting to recover Belarus’ debt for gas. The disagreement between the states is due to the fact that, the price of natural gas has a currency component, which excludes price reductions, even amid the fall in oil prices on the world market.

The share of oil refining in the total volume of industrial production in Belarus was 16.3% in 2015. In Q4 2015, about 6 million tons of oil was supplied to Belarus and if that volume dropped to 3 million tons in 2016, Belarus industrial production index would halve and industrial performance would slump. The decline in oil production would lead to a reduction in export sales and a reduction in the wholesale trade. The share of the wholesale trade in GDP is around 6%. In addition, the Belarusian state budget would not receive the projected amount of taxes calculated in GDP.

In July-August 2016 alone, Belarus’ GDP fell by 0.3% thanks to reduced oil supply. If dispute around natural gas price remains unresolved, Russia will reduce oil supplies, which, in turn, will result in Belarus’ GDP reducing by more than 4% as compared with 2015. That said, that would be the worst result for the last 15 years.

In Q4 2016, oil supplies from Russia may halve as compared with 2015. Given the significance of refining for various economic sectors, Belarus’ GDP may fall by more than 4%, which would be the worst result in recent years.

Similar articles

Minsk attempts to make up for image losses from military exercises by opening to Western values
October 02, 2017 11:49

The Belarusian authorities regard the Catholic conference as yet another international event to promote Minsk as a global negotiating platform. Minsk’s proposal to organise a meeting between the Roman-Catholic Church and the Russian Orthodox Church is rather an image-making undertaking than a serious intention. However, the authorities could somewhat extend the opportunities for the Roman-Catholic Church in Belarus due to developing contacts with the Catholic world.

Minsk is attempting to lay out a mosaic from various international religious, political and sportive events to shape a positive image of Belarus for promoting the Helsinki 2.0 idea.

Belarus’ invitation to the head of the Holy See for a meeting with the Patriarch of the Russian Orthodox Church should be regarded as a continuation of her foreign policy efforts in shaping Minsk’s peacekeeping image and enhancing Belarus’ international weight. The Belarusian authorities are aware that their initiative is unlikely to find supporters among the leadership of the Russian Orthodox Church in Moscow. In Russia, isolationist sentiments prevail.

In addition, for domestic audiences, the authorities make up for the lack of tangible economic growth with demonstrations of growth in Minsk’s authority at international level through providing a platform for religious, sportive and other dialogues.