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.
Amid budgetary cuts on social protection, the Belarusian public sector is experiencing a management crisis and a balance shift in the state resource redistribution system. The authorities are forced to revise their most unpopular decisions during the implementation due to the pressure from affected social groups. The state is unlikely to oppose to some civil society and opposition organisations in strengthening their role in society in order to retain touch with the population and to be able to respond to the most harsh criticism of state initiatives.
The Architecture and Construction Ministry has acknowledged that the decree No 585 on assistance to large and young families in building and buying housing was prematurely rescinded.
The authorities are often forced to revise their decisions on curtailing social assistance to different social groups during their implementation, without preliminary impact assessment and feedback from the population, so as they lead to the growth in social tension. Due to the centralised decision making, languishing state resources and the lack of public debate as a balancing instrument in issues related to social protection, the state administration is losing control of the population.
Perhaps, the compensatory mechanisms of the state apparatus lack the time to adjust to dwindling state resources for supporting the existing social model, even in a reduced form. The authorities have completely or partially paralysed operations of independent public institutions and representative bodies, through which they could monitor public moods and receive feedback from the population, such as local councils, the parliament, political parties and NGOs. Last year, under the pressure of the authorities, the last independent institute for measuring public sentiment, IISEPS, suspended operations.
President Lukashenka’s self-removal from the decision-making on current socio-economic issues, also could have affected the state apparatus’ operations. The president has always been very sensitive about adopting unpopular decisions which could lower his popular support, hence demanded a careful preliminary assessment of such decisions. However, recently, especially after the introduction of the tax on social dependants, the president has mainly focused on the foreign policy agenda.
Hence, a lacuna has formed in the state decision-making after the president reduced participation in the current socio-economic policy formation, which leads to an increase in manifestations of dysfunction in the public administration.