Fuel prices to go up in Belarus to improve financial health of refineries
Petrol excise duty hikes, anticipated increase in the price of crude oil supplies to Belarus and unfavourable foreign market situation are the main reasons why Belneftekhim is likely to increase prices on petrochemicals. Revenues from refining make a lion’s share in the Belarusian budget income. Amid the lack of alternative sources to replenish the budget and due to the need to continue modernising refineries, fuel price hikes are inevitable and may occur before the 2016 ends.
Belneftekhim management announced an increase in fuel prices in Belarus. They quoted the following reasons for the price hike: (a) petrol excise duty hikes in Belarus as of March 1st, 2016 at 50%, while fuel prices remained unchanged for over 670 consecutive days; (b) expected increase in the oil price for Belarus by 8-9% due to the tax manoeuvre in Russia; (c) unfavourable foreign market situation for petrochemicals. In addition, in H2 2016 oil supplies to Belarusian refineries decreased due to the unresolved gas dispute between Russia and Belarus.
Oil refining industry in Belarus is a strategic one. Export duties on oil products in 2015 made about 9% of budget revenues and fuel excise duties - about 2% of total consolidated revenues. Export duties on petrochemicals are a major source of funds to repay Belarus’ public debt. In H1 2016, refining earned USD 330 million for the state budget. In total, in 2016, the budget projected to earn USD 1.1 billion, with the oil price projected at USD 50 per barrel. Due to the fall in the oil price in early 2016, however, the Belarusian budget is unlikely to achieve its target.
Due to fuel excise duty hikes and reduced margin from oil refining at refineries, their financial health deteriorated in the first nine months of 2016 from USD 245 million to USD 76 million. Refineries require frequent modernisation, which, in turn requires significant financial resources, which they lack due to falling profits. The state is unable to reduce fuel excise duty due to falling revenues from other major items, such as tax income and potash export duties. In addition, redistribution of import duties within the EEU framework is likely to lead to deficit instead of surplus.
In the given circumstances, the rise in fuel prices is inevitable and will partially compensate for the missing income from the income tax, will improve refineries’ financial health and partially will reduce the burden on the credit sector. The population will be prompted to increase their spending on fuel, which will lead to an increase in the net currency supply on the domestic market and will enable the National Bank to service the national debt amid shortfalls in export duties on petrochemicals.
The state’s excise duty policy and refinery’s falling revenues have led to a sharp deterioration in the financial health at Belarusian oil refineries. With fuel price hikes on the domestic market the authorities aim to strip the population of additional revenue and spend it on the modernization of refineries and other government purposes.
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.