Belsat: Moscow deals a double blow to the economy of Belarus, depriving it of oil subsidies
The decision of the State Duma of the Russian Federation to gradually abolish the export duty on oil actually deprives Belarus of the “oil subsidy” that it has received over the past 20 years due to the re-export of cheap Russian raw materials. According to experts, this will be a “double blow” for the Belarusian budget, which will provoke stagnation if Minsk does not reform the economy, warns Belsat.
The State Duma of Russia adopted a bill on the gradual abolition of duties on the export of oil. And this actually means “the end of the economic model” of Belarus, reports Belsat. Now oil for Minsk will cost as much as for the rest of the world, and it will lose the “oil subsidy” that has supported the Belarusian economy for the last 20 years, the article says.
At current prices, Belarus buys oil in Russia cheaper, winning more than $ 2.5 billion a year due to this, the article explains. In total, this represents about 5% of Belarusian GDP. “Today, all duties on oil and oil products, and even on Belarusian oil, which is exported, go to the Belarusian budget,” said Tatryana Manenok, a Belrynka columnist.
The savings are achieved due to the fact that Russia imposes the export of its oil on export duties in the amount of 30% of the world price per barrel, but to Belarus, so far, Russian hydrocarbon raw materials have been supplied duty free. And although in the price formula for Minsk there is a small margin compared with the domestic one, the final cost is still almost a quarter less than the global one, Belsat notes.
Minsk re-exports part of the cheap oil received to the West with its mark-up. This year the volume of such re-export amounted to 6 million tons, according to the article. The remaining 18 million tons from Russia are sent to the Mozyr and Novopolotsk refineries, and then Belarus also sells about two thirds of the oil products produced there in the West.“Last year the volume of petroleum products amounted to approximately 600 million dollars. The volume of duties on customs clearance of Russian oil is approximately 582 million dollars. This amounts to more than $ 1 billion in the Belarusian budget, ”explained Manenok in an interview with Belsat.
However, the recent decision of the Russian parliamentarians will deliver “the strongest blow to the Belarusian economic model over the past 20 years,” the article notes. Having approved the "tax maneuver," the State Duma began a "countdown" before the elimination of the oil subsidy for the official Minsk. Starting from next year and up to the year 2025, Russia will gradually reduce the export duty on its oil from the existing 30% to zero, at the same time raising the tax on oil production.
As a result, Minsk will no longer be able to speculate with Russian hydrocarbons, Belsat emphasizes. This means that Belarus will lose the resulting 5% of GDP. And at current economic growth rates of 3.5% of GDP or less, such a blow to the budget will once again return the country to stagnation, unemployment and capital flight, experts warn.“Obviously, this will be a double blow for the budget: both in the form of under-received oil duties, and in the form of under-receiving excise taxes on light oil products,” said Alexander Mucha, analyst at Businessforecast.
Of course, this “blow” from Russia will not be a one-time, but “stretched” for the next six years, and the Belarusian authorities can mitigate it with the help of market reforms aimed at reducing the economy’s dependence on raw materials subsidies, the article says. “The experts we interviewed agree that in the long run, raw material subsidies from Russia hampered the welfare of citizens more than it helped. After all, Alexander Lukashenko directed the received petrodollars to support inefficient state industry, squeezing it to create effective jobs in the private sector, ”concludes Belsat.