Belarus Will not Compensate Russia Nullification of Duty on Oil in 2015

In 2015, export duties on oil used for production of oil products for export to Europe will not be transferred to the Russian budget; as a result of that Belarus will save about $1.5bn in addition to those $1.5bn which was decided to leave to Belarus under the previous agreements.  

It is to be noted that at present apart from the agreements on the Customs Union, the Single Economic Space and the Eurasian Economic Union Belarus has a bilateral agreement with Russia under which Russian gas and oil are supplied without export duties which in case of oil amount to about 50% of the world market price. Until recently, Belarus compensated Russia duties on that portion of oil which was used for production of petrol for export to third countries.

As of 2013, thanks to oil and gas Belarus received annual preferences of about $9bn of which nearly $3.2bn were compensated to the Russian budget, that is, a net transfer from the Russian budget to the economy of Belarus amounted to about $6bn (about 10% of GDP of Belarus).

Belarus has long insisted on abolishment of the compensation to the Russian budget. In the agreement on the Eurasian Economic Union, there is no mention of that issue, however, early in May 2014 a bilateral agreement was reached on provision by Russia in 2015 of a 50% discount on that compensation (that is, $1.5bn-$2bn) which situation justified to a great extent the consent of Belarus to sign the agreement on the Eurasian Economic Union.

In Belarus, they believed that from 2016 the request for compensation would be completely abolished – in such a case a transfer from the Russian budget to the economy of Belarus will increase to $10bn (nearly 15% of GDP of Belarus). It is likely that the request of at least partial compensation will be abolished from the next year.

Alexander Knobel, PhD (Economics), Head of the Foreign Trade Department