Belarus demanded to sell all gasoline to Russia

The Russian Ministry of Energy told newspaper Izvestia that Belarus doesn’t return the gasoline made from Russian oil and sells it under the guise of thinners and solvents.

The Russian Ministry of Energy told newspaper Izvestia that Belarus doesn’t return the gasoline made from Russian oil and sells it under the guise of thinners and solvents.

Russia plans to compensate the $bln loss to the budget from Belarus’ duty-free exports of Russian oil products to the West.

Thus, Russian insists on the fulfillment of the previously reached agreements to ship to Russia by the end of 2012 2,100,00 tones f gasoline and 3,500,000 tones diesel fuel refined from Russian oil at Belarusian oil refineries.

If satisfied, such demands will bring Belarus the losses of dozens of billions of US dollars.

Belarusian oil concern Belneftekhim purchases Russian oil at prices above average home prices in Russia, but has to sell the refined oil products at low Russian prices.

"As of last nine months of 2012, Russian met the obligations on shipment the oil and exceeded the agreed shipments of base oil products by several times. In its turn, Belarus has shipped not more that 2 per cent of the planned amount what, actually, dissatisfies the Russian party," the Ministry of Energy told Izvestia.

Suspicious metamorphosis of solvents

In accordance with the pack of agreements on the Customs Union, Russia has been supplying Belarus with duty-free oil since 2011. The price is calculated on the basis of equal revenue: the revenues from selling oil to Belarus should be the same as the revenues from exports of oil products made in Russia. The oil shipments to Belarus in 2012 was agreed to be 21.3mln tones what actually corresponds to the capacity of Belarusian oil refineries. From the total amount, only 6.8mln tones are used for Belarus’ home needs. The rest is exported.

If oil products manufactured in Belarus from Russian raw materials are exported outside the Customs Union, Belarus has to pay duty to Russian budget.

The export duty depends on world oil prices and today is $377 per ton.

In summer 2012, Russia expressed its concern about the drastic increase of oil shipments to Belarus and also about drastic increase of organic solvents from Belarus, which is not subject to any duty.

According to the Belarusian National Statistic Committee, the exports of solvents from Belarus increased from 244,000 tons in 2010 to 2.1mln tons in 2011 and in H1, 2012, it totaled 2.9mln tones.

The major consumer of Belarusian “solvents” became Latvia who bought 1.5mln tones of them. The Latvian statistics marks the record shipments of oil products to country’s seaports, including liquid chemicals — which, actually, are solvents. Surprisingly, Belarusian solvents turned into oil products after they crossed the border with Latvia.

How Russian government solves the issue

If consider the current oil prices, the total amount of duties underpaid to Russian budget in 2012 is estimated more than $1bln.

This summer, the situation caused the displeasure of Russian government. The railway shipments of Russian stove gasoline — the oil product used to produce “solvents” — to Belarus was halted. Then Russian vice-Premier Minister Arkady Dvorkovich ordered to investigate the incident.

Russian Ministry of Finances, Federal Migration Service, Ministry of Energy and Ministry of Foreign Affairs were tasked with preparing the solutions which would prevent the export of oil products under the guise of solvents.

The proposals were to be considered at the meeting of the Customs Union Economy Commission on September 14.

Russia prepared three possible solutions. All of them presuppose to alter the 2010 agreement on duties on oil and oil products exported from Belarus outside the Customs Union.

It is suggested either to forbid Belarus using Russian oil products for further processing and exporting or to demand paying the duty on the very moment of supplying oil to Belarus for processing and exporting. The third option suggests making the duty not dependent on customs procedures with the goods exported from Belarus.

As some sources inform, the suggestions were blocked by Belarus at the meeting of the Customs Union’s Economy Commission on September 14 and September 25.

Later, Belarus’ vice-PM reported the information was not valid. However, the decision was not made.

In September, the ministries of economy of two countries started consulting on the execution of 2012 indicative balance and drafting the 2013 indicating balance.

During the talks, Russian demanded from Belarus to ship 2.1mln tones gasoline, 3.5mln tones diesel and 0.2mln tones aviation fuel mentioned by the obligations in the 2012 balance.

The representatives of Belneftekhim explained that such shipments are not profitable as Belneftekhim buys Russian oil at higher prices than Russian oil refineries do. They also reminded that part of Russian oil is refined in Belarus on the basis of processing and suggested meeting the shipment obligation at the expense of Russian companies. Russia, however, was not satisfied by these explanations and Russian Ministry of Energy cut the oil shipments to Belarus from 5.4 to 4mln tones in Q4, 2012.

The scheme satisfactory for Russian oil traders

Pavel Strokov, the chief of Russian company IAC Cortes says that importing Belarusian oil products in Russia is less profitable than the existing scheme of export to Ukraine and Europe.

He also reminded that the deficit of gasoline in Russia is a system fault caused by lagging the refining capacity behind the market growth. The situation worsened recently due to — on one hand — a stricter ecology policy with its demands for a greener fuel. On the other hand due to restraining home fuel prices which made the companies look for more profitable schemes, in particular exporting the oil products duty free under the guise of solvent.

Russian oil traders — after the constant consultations with the Ministry of Energy — also stand for restricting oil supplies to Belarus.

However, the trader do not anyhow comment on the situation. Belneftekhim also refused to give comments on the talks as they are far from the end.

In 2010, discussing the conditions of supplying Belarusian oil refineries with Russian oil was close to make Belarus leave the Customs Union. And in 2007, the construction of $4bln Russia–EU oil pipeline which bypasses Belarus resulted from the 'energy war' between Russia and Belarus. The oil market informers are sure Russia and Belarus will be able to settle the matter this time without halting oil shipments.

Currently, the previously agreed Q4 amount of oil is transported through the pipeline.

It is most possible that the agreements are going to be reached not until December, when Russia’s restrictions his Belarusian oil refineries.

As Aliaksandr Lukashenka mentioned the other day, Belarus insisted that the production and duty-free export of biofuel and solvents is profitable for both parties.