The Kremlin Instructed Not to Sell Oil to Lukashenka, Economist Says

This could lead to the devaluation of the Belarusian ruble and collapse of the economy.

Yesterday, January 14, it became known that the major Russian oil companies received recommendations from the Kremlin to suspend oil supplies to Belarus.

At the same time, an oil supply contract with the company of Mikhail Gutseriev, a friend of Lukashenka, is signed only until the end of the month, while the volume of these supplies is enough only to minimum load of one of the two refineries - Naftan in Navapolatsk. Mozyr refinery did not receive Russian oil on January 1-14.

Against the background of the cessation of oil supplies from Russia, Minsk suspended exports of oil products, which is an important item of foreign exchange earnings. Besides, January 10, Lukashenka's decree introduced a 50% profit tax on oil transit through Belarus. After that, a spokesman for Rosneft made a pretty tough statement, saying that Lukashenka had "been nailed," and "freeride is over for him".

How will further events develop and how can the "oil war" end for the Belarusian economy? Doctor of Economic Sciences, Professor Barys Zhaliba answers the questions of Charter97.org.

- How would you comment on Kommersant's information that the Kremlin prohibited Russian large companies to export oil to Belarus?

- I think the information provided by Kommersant sources is unbiased, because Russia, like our country, has an authoritarian economy where one person handles all key issues.

Of course, one can say that oligarchs are there and they do their business the way they want and so on. It's not true!

The Kremlin ordered all the oligarchs, not to mention Rosneft of Sechin and others, not to sell oil to Belarus at prices of the previous year. I think that the Kremlin authorized Gutseriev to make limited supplies. This is not Gutseriev's initiative. He would take too much risk if it was his initiative. As they say, Putin has seized everything.

Gutseriev, on the other hand, was "authorized" to sell a minimum amount of oil to temporarily mitigate the problem. After all, there is bidding at prices.

I believe that it makes no sense for Belarus to bargain in this situation. First of all, the price offered by Russia with the so-called "bonus" of $10 per ton should be accepted. Let it be higher. Nevertheless, how long should our refineries be addicted to the Russian cheap oil which is maximum 80-85% of the world price? This price includes delivery costs! It can't last forever. Therefore, I think the Belarusian side does not need to aggravate this problem. If it's only a matter of price.

The root of the problem may lie deeper - the notorious "integration". Putin wants to bring an inflexible "ally" to his knees by such methods.

If one is guided by economic interests only, then there is no reason for Belarus to hold back. If the price is higher, then the price is higher. The same is true for gas. Another question is that Lukashenka is losing a good source of income for him, which supports all his bureaucracy. Our consumers buy gas at market prices. The difference the authorities put in their pockets. Therefore, there are many things, as they say, intertwined. First of all, it hits the income of the authorities.

- Mozyr refinery did not receive Russian oil on January 1-14, and Naftan is operating at minimum load. What does it mean for the petrochemical industry of Belarus and what problems can arise in the economy?

- The problem is that Belarus has already suspended exports of oil products.

This is the key currency item in the state budget, and it is already underfunded. If this logical chain is continued, we will see the following: currency shortages may mean the ruble devaluation at its worst scenario.

Then what? The only thing left to do next is to negotiate. After all, Gutseriev's supplies extend only for January. If no agreement is reached, there will be a collapse, because the economy will be left without motor fuel.

It is impossible to arrange oil supplies from alternative sources at once, this direction should have been developed much earlier. Economists have been telling the government this for a long time.

- How would you comment on the recent statement of Rosneft's spokesman that Lukashenka has been "nailed" and "freeride is over for him"? What goals do you think the Kremlin pursues?

- I guess it's such a psychological trick. After all, analysts have already mentioned that the transiter will be subject to the tax. The transiter is Homelneft Druzhba with its southern branch and profits.

Again, it can be used as a reason to raise the Russian transit fee. For example, we introduce an ecological tax which is required by preventative measures of the Druzhba southern branch. Logically, no direct suppliers of Russian oil to Belarus should be involved. Our enterprises will pay.

The authorities will have grounds to say that our costs increase, let us raise the fee for the transit of your Russian oil to the West. This is the only way to interpret the authorities' decision.

- How can the next "oil war" end, given that Russia takes such tough measures against Lukashenka for the first time?

- It will end with agreements, but the Belarusian side has much weaker arguments this time. I think that we should agree to the Russian conditions. To buy oil and gas at fair, market prices. And to instruct enterprises to work at such prices, too.

- What consequences can all this bear for the Belarusian economy if the negotiations protract?

- Bad ones. In the end, both our refineries will stall and it will initiate the collapse in the economy.

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