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.
President Lukashenka continues to rotate staff and rejuvenate heads of departments and universities following new appointments in regional administrations. Apparently, new Information Minister Karliukevich could somewhat relax the state policy towards the independent media and introduce technological solutions for retaining control over Belarus’ information space. New rectors could strengthen the trend for soft Belarusization in the regions and tighten the disciplinary and ideological control over the student movement in the capital.
President Lukashenka has appointed new ministers of culture and information, the new rector of the Belarusian State University and heads of three universities, assistants in the Minsk and Vitebsk regions.
The new Information Minister Karliukevich is likely to avoid controversial initiatives similar to those former Minister Ananich was famous for, however, certainly within his capacities. Nevertheless, the appointment of Belarusian-speaking writer Karliukevich could be regarded as the state’s cautious attempt to relax environment in the media field and ensure the sovereignty of national media.
The Belarusian leadership has consolidated the trend for mild Belarusization by appointing a young historian and a ‘reasonable nationalist’, Duk as the rector at the Kuleshov State University in Mogilev. Meanwhile, while choosing the head of the Belarusian State University, the president apparently had in mind the strengthening of the ideological loyalty among the teaching staff and students at the main university in order to keep the youth movement at bay. Previously, Korol was the rector of the Kupala State University in Grodno, where he held purges among the disloyal teaching staff.
The trend for the renewal of mid-ranking executives and their rejuvenation has confirmed. The age of the Culture Minister and three new rectors varies from 39 to 44 years old.