Belarus Offered Russia Her Oil Refineries in Exchange for Access to Oil Extraction

The economy of Belarus, with its inefficient capacity, functions largely due to ‘energy subsidizing' by Russia.

Oil and natural gas are supplied from Russia to Belarus at prices much lower than the international prices, and besides, no export duty is levied on the supplied energy resources As a result, Russia’s state budget suffers substantial losses. According to our estimations, Russia’s losses resulting from the duty-free supply of oil and petroleum products to the Republic of Belarus amount to $ 6bn per annum.

At the same time, the bulk of Russian oil is actually exported to Belarus in the form of refined petroleum products. Thus Belarus, in effect, re-exports Russian oil.

The acquisition of Belarusian oil refineries by Russian companies is, in principle, economically beneficial for Russia. These refineries are situated nearer to the European supply market, and so export-oriented production of petroleum products there would be more cost-effective than at the majority of Russian oil refineries.

However, it is hardly feasible, from the point of view of economic benefit, to grant to Belarus, in exchange for that project, the rights to extract Russian oil and natural gas. What Russia needs primarily from her foreign partners in that sphere is hi-tech methodologies and knowhow. Unlike the leading US and European oil companies, Belarus has no such resources.

Yuriy Bobylev – Candidate of Economic Sciences, Head of the Mineral Sector Economics Department