Russia and Belarus intend to continue oil negotiations

Russia and Belarus intend to continue oil negotiations

According to a knowledgeable source, Russia and Belarus will continue negotiating the oil issue following yesterday's meeting between Dmitry Kozak, the Deputy Vice Prime Minister of the Russian Federation, and Igor Lyashenko, the Belarusian Vice Prime Minister. 

At the moment, the main problem between the parties in the oil sphere consists in the absence of contracts for oil supply from the Russian Federation to Belarusian refineries after January 1. One of these refineries (Mozyr oil refinery) partly belongs to two Russian oil companies - "Rosneft" and "Gazprom neft". 

According to the information from sources in the oil market, the parties failed to settle the differences related to the price of crudes. In particular, the Belarusian side sought cancellation of premiums added to the price of tax-free supplies of oil to Belarus, giving the increase in the price of crudes due to implementation of the tax maneuver in the oil industry in the Russian Federation as a reason. Russian companies, in turn, offered to preserve the conditions of 2019, as the cost of oil from the Russian Federation for Belarus already amounts to 83% of the international oil price, according to Belneftekhim.

Russian authorities, on the other hand, insisted that the question of the cost of Russian oil is commercial in nature, and the government cannot interfere with it, as the industry works according to market conditions, and oil prices are not regulated. 

The problem was temporarily solved by the contract concluded by Mikhail Gutseriev's companies - Russneft and Nefitsa - for 133 thousand tons of oil for the Novopolotsk oil refinery. A small amount of raw oil is expected to be delivered to the Mozyr plant in the near future. However, further supplies are still in question, even though the indicative balance of the two countries contains the value of 23.5 million tons in 2020. At the same time, according to both parties, transit of oil into Europe via the Belarusian part of the Druzhba pipeline continues without restrictions.

Moreover, Belarus planned to develop a solution for compensation of losses due to the spring force majeure at the Druzhba pipeline in cooperation with the Russian Federation before the end of 2019. 

Against the backdrop of ongoing discussions, the Belarusian side tried several times to increase the rates for transit via the Druzhba pipeline; moreover, in January it announced the introduction of an environmental tax for enterprises carrying out transit of oil and petroleum products through the territory of Belarus. Taxpayers include Belarusian enterprises "GomeltransneftDruzhba" (operator of the Druzhba pipeline) and "ZapadTransnefteprodukt" (subsidiary of the Russian company Transnefteprodukt). The Ministry of Finance expects tax income in the amount of $100 million in 2020.