Russia Ended Reselling Of Oil To Ukraine By Belarus

Natal’ya Dembinskaya for RIA reports… 

Starting November, Russia will quit supplying Belarus with gasoline, diesel and fuel oil, the restrictions will last until the end of next year. The Ministry of Energy said that export of oil products to Belarus is impractical, the republic [of Belarus] fully provides for her need in oil products though processing of Russian oil. Minsk does not need the surplus, the ally [of Russia] sells them to neighbouring Ukraine, making billions of dollars. Observers remark that the volumes of reexport have reached such a scale that Moscow could not leave it without attention.

More than is needed

The Russian Ministry of Energy has clarified that imports of certain oil products not made in Belarus will remain. The restrictions [imposed] will also not touch oil exports. In 2019, Russia will export 24 million tons of oil to the neighbouring country, just as much as last year.

What concerns gasoline, fuel and fuel oil, the indicative balance indicators provided are zero.

The Belorussians have imported 2.3 million tons of oil products for 900 million dollars from Russia. It is apparent that the actual need of the republic [of Belarus] is far lower. In contrast, five years ago [Belarus] imported 90 thousand tons of oil products from Russia.

Everything that Belarus did not use herself was actively reexported – the main volume of it went to Ukraine.

The Belorussians are not happy

Ending imports of oil, oil products and gas in volumes over those needed for Belarusian consumption have been debated for quite a while. Now a decision was made, and the calculation is simple. New agreements make grey schemes with imports of oil products, within the framework of the Union State, that lead to shortfalls for the Russian budget, impossible.

The Belorussians do not agree with this position. In August, [Belorussian] president, Alexander Lukashenko said in an interview to Belarus-1 TV channel that he does not understand reproaches against Belorussian companies that they buy shady oil products, process them in Belarus, and then sell them on foreign markets. The head of state said this is not a new practice. And shady oil products are, in his words, oil products not realised in Russia, processing of which makes Belarus peanuts.

But the talk is not exactly about peanuts.

And independent economic expert, Anton Shabanov says “Belarus was not making bad money; to buy for two roubles and sell to neighbours for five was the official position of the government.”

As Neighbours

In recent years the volumes of such imports were growing with a geometrical progression. Belorussian economists have calculated that Belarus made 5% of her GDP on reexport of oil products.

“Russian, Ukrainian, and Belorussian people have always been united, overlooking all differences, by an understanding. The understanding was in Belarus is a comfortable channel for reexport.”

-Alexey Gromov, director of Energy direction of the Institute of Energy and Finance

The expert suggests that the channel was for the time being closed in a trial regime. However, if the Belorussians provide convincing case that they need more of our energy resources for [their] economy, the restrictions could be reconsidered.

“This is a wise, preventive measure, we do not want to help another country to our own detriment. The Ukrainians can buy oil somewhere else if they do not want to buy from Russia directly. The fact that we are loosing significant amount of money became very apparent. Ignoring this became uncomfortable” 

-Dmitry Adamidov, independent analyst

They will have to pay more

The coming ban on the export of oil products promises to be felt by the Ukrainian market of oil refinery products. According to some date, Ukraine covered 40% of her motor fuel needs by Russian oil reexported by Belarus. Advantages for Kiev are apparent: expedient logistics with almost direct deliveries and good prices.

“The Ukrainians are not threatened by a physical deficit, there are plenty of oil products on the market. The difference from the cheap grey scheme (Minsk got the oil products tax free within a Customs Union) is that imports from alternative sources are more expensive, they will have to deal with market prices.”  

Economists think that one of Belarus’ closest competitors, for example Kazakhstan or alternatively European neighbours, may try to substitute the missing Belorussian imports.

Alexey Gromov thinks: “Ukraine buys alternative gas in Europe for a price that is ten to fifteen percent higher than the Russian price, the same will happen with oil products.”

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