Russia suspects Belarus of smuggling petroleum products
Russian Deputy Finance Minister Sergei Shatalov said on June 28th that Russia’s Finance Ministry suspected Belarus of exporting petroleum products under the guise of organic solvents in order not to pay export duties to Russia. Apparently, Russia will insist on putting the smuggling to an end, which, in turn, will result in substantial reductions in foreign proceeds and reduced profitability of Belarusian oil refineries and oil traders.
“We have encountered that the organic solvents export from Belarus to foreign markets has increased by several times. We fear this is a cover up. It is possible that under the guise of petroleum solvents petroleum is exported. Currently we are looking into this matter and will react accordingly. We will negotiate with our Belarusian counterparts”, Mr. Shatalov said while speaking at a European Businesses Association’s conference.
It should be emphasized that cessation of petroleum products smuggling under the guise of solvents, diluents and lubricants will result in significant reductions in foreign exchange proceeds and will reduce the profitability of Belarusian oil refineries and oil traders.
In January – April 2012, Belarusian oil products’ export increased by 62.8% to USD 5.443 billion, diluents and solvents’ export increased by more than 7.3 times to USD 1.705 billion, and lubricants materials export – by 43 (!) times up to USD 590.926 million. Crude oil exports increased in January-April 2012 by 4.5% to USD 450.549 million (supply to Germany).
All in all, Belarusian “oil” exports (oil, mineral oil, diluents, solvents, lubricants, liquefied petroleum gas) in January-April 2012 doubled compared with the same period last year - to USD 8.307 billion. The share of “oil” exports in the overall country’s exports increased from 35.4% in January-April 2011 to 51% in January-April 2012.
Moreover, it seems that Belarusian companies re-export Russian oil under the guise of solvents and thinners, without paying applicable fees to the Russian budget. In January-April 2012 exports of Belarusian oil products, thinners, solvents and lubricants in physical terms (9.144 million tons) was significantly higher than domestic oil production (7.578 million tons).
In January-April 2012 Belarus imported 4.189 million tons of duty free petroleum products worth USD 2.583 billion, which is 3.7 times higher than in January-April 2011. The bulk of supply (99.1%) is coming from Russia.
Therefore, Belarusian oil traders jointly with Russian oil companies have created de facto oil offshore in Belarus to evade export duties payments to the Russian budget. Experts assess Russian budget’s losses in 2011-2012 as exceeding USD 1.5 billion. Therefore one should anticipate the oil offshore to seize to exist in the near future. In other words, Russia will request Belarus to show the real volumes of petroleum products exports and, consequently to pay export duties in full.
For reference. The National Bank of Belarus in 2011 paid USD 3.07 billion in export duties for oil products to the Russian budget, and in January-May 2012 – USD 1.857 billion.
Over the past year, military-political relations between Minsk and Kyiv have become complicated. Due to their high inertia and peculiarities, this downward trend would be extremely difficult to overcome.
The root cause of the crisis is the absence of a common political agenda in the Belarusian-Ukrainian relations. Minsk is looking for a market for Belarusian exports in Ukraine and offers its services as a negotiation platform for the settlement of the Russo-Ukrainian war, thereby hoping to avoid political issues in the dialogue with Kiev. Meanwhile, Ukraine is hoping for political support from Minsk in the confrontation with Moscow. In addition, Ukraine’s integration with NATO presupposes her common position with the Alliance in relation to Belarus. The NATO leadership regards the Belarusian Armed Forces as an integral part of the Russian military machine in the western strategic front (the Baltic states and Poland). In addition, the ongoing military reform in Ukraine envisages a reduction in the number of generals and the domestic political struggle makes some Ukrainian top military leaders targets in politically motivated attacks.
Hence, the criticism of Belarus coming from Ukrainian military leadership is dictated primarily by internal and external political considerations, as well as by the need to protect the interests of generals, and only then by facts.
For instance, initially, the Ukrainian military leadership made statements about 100,000 Russian servicemen allegedly taking part in the Russo-Belarusian military drill West-2017. Then the exercises were labelled quazi-open and military observers from Ukraine refused to provide their assessment, which caused a negative reaction in Minsk. Further, without citing specific facts, it was stated that Russia was building up its military presence in Belarus.
Apparently, the Belarusian and Ukrainian Defence Ministries have entangled in a confrontational spiral (on the level of rhetoric). Moreover, only a small part of the overly hidden process has been disclosed. That said, third states are very likely to take advantage of the situation (or have already done so). This is not only about Russia.
The Belarusian Defence Ministry officials are restrained in assessing their Ukrainian counterparts. However, such a restraint is not enough. Current military-political relations between Belarus and Ukraine are unlikely to stabilise without the intervention of both presidents.