Belarus – Russia: Negotiations on Oil Donations

On December 19 summits of the CSTO, the Eurasian Economic Community and the Customs Union will take place in Moscow. The agreement on oil supplies in 2013 is expected to be concluded during negotiations in Moscow between Lukashenko and Putin at the end of December 2012.

During last months of this year tension grows in relations between Lukashenka's regime and Russia. Lukashenka's team indicates to Moscow that it would not make concessions on issues of 'genuine integration', as it is seen by the Russian side.

With the exception of the forced sale of Beltransgaz, major Belarusian enterprises will not be sold to Russian companies. The authorities refuse to abide by the terms of extension of the loan of the Anti-Crisis Fund of the Eurasian Economic Community.

Moscow's dissatisfaction and irritation was also manifested in the statements that supply of crude oil to Belarus would be limited by 18,000,000 tons which is by 5,000,000 less than requested by Lukashenka. Limiting supply would have considerable negative consequences for Belarusian economy which became dependent on workload of oil refineries.

Russia's Position

On October 29 the Vice-Premier of Russia Arkadij Dvorkovich announced that the issue of the volume of oil export to Belarus in 2012 – 2013 will be discussed depending on the solution of the problem of solvents export to Belarus. In October, according to Russian statistics, 1 million 347 thousand tons of oil were delivered to Belarus, or 22% less than in September.

At the beginning of the negotiations (which took place in Moscow from October 31 to November 1 the Russian delegation headed by Arkady Dvorkovich announced about Russia’s decision to supply 4 million tons of oil to Belarus in the last quarter of 2012, whereas the Belarusian side insisted on 5.3 million tons of oil.

As a result of the negotiations, the Belarusian and the Russian side claimed that an agreement on oil supplies for the last quarter of 2012 had been reached. However, the announced volumes of supplies were different.

The participant of the negotiations, Deputy Minister of Energetics of Russia Pavel Fedorov said Russia would export to Belarus 4.8 million tons of oil in the last quarter of 2012, in its turn, Belarus would export to Russia 200 thousand tons of petrol.

Fedorov remarked: "Such increase in oil supplies shows our readiness to find solutions, with due consideration of long-term strategic relations with the Belarusian side." The same figures were announced by the Russian Ambassador to Belarus Alexander Surikov.

One can make a conclusion that the disagreement about the volume of oil supplies for the last quarter of 2012 has remained. Besides, disagreements on some other important issues have not been removed. There is no detailed information yet about the current suggestions from the Russian side.

The issue of compensating losses to the Russian budget from the "solvents business" has not been settled.

Just before the negotiations, the Russian side named the figure 1.5 – 2 billion USD as the tax not paid by Belarus. After the negotiations the figure rose to 2.5 billion USD. On 14 November the Minister of Energetics of Russia Alexander Novak assessed the potential losses of the Russian budget from 1.5 to 2.5 billion USD.

What Belarus Hopes For

On 16 November the First Vice-Premier of Belarus Uladzimir Siamashka commented on the statements of the Russian high officials, claiming that Belarus had to fulfill the obligation to supply oil products to the Russian market. As he said, in 2012 supplies to Russia were not always profitable for Belarusian oil-refining factories.

During the negotiations Semashka strongly denied that Belarus had violated any conditions of cooperation with Russia.

The authorities take tough stance in their talks with Russia taking into account not only the context of bilateral relations. Lukashenka's team believes that Russia will make concessions and it cannot afford long term worsening of relations with its only ally.

Already now, on the eve of the last round of talks on crude oil supply, Lukashenka's team indicates to Russia how the Belarusian side will act if crude oil supply is limited. Crude oil supply from Azerbaijan will be resumed. Belarus will restrict military cooperation with Russia. It will create tension in relations within the CSTO. If Russia does not agree on Lukashenka's terms, the authorities will use other opportunities for pressure as well.

On 26 November Lukashenko repeated the main points of the Belarusian position, announced previously in the talks with the First Vice-Premier. In particular, he remarked that Belarus had not violated the terms of oil supplies in 2012. Lukashenka announced: "I think we will arrive at an agreement, there is enough oil in Russia."