Lukashenka wants Russia to pay $700mn for “tax maneuver”

Russia may lose an additional $700 million of its budget.

The final sum of the reduction of Belarusian duties on oil products will be announced on October 10, the day of the meeting between Putin and Lukashenka in Minsk. The compensation may be as large as $700 million or more, Vedomosti learnt from a high-ranking source in Minsk.

A Russian government official confirmed this sum on conditions of anonymity and noted that “Belarus has a huge appetite”. Another source from the government says Belarus may have even larger discounts.

So, Russia's total losses due to the “discounts” for Minsk will rise to $2.2bn. Belarus was allowed this spring not to transfer $1.5bn of duties to Russia (it was Belarus's condition of joining the Eurasian Economic Union). If weren't for the discounts, Minsk would pay Russia $3bn next year.

Russia announced this spring a tax maneuver in the oil sector: a sharp rise in mineral extraction tax and a significant decline in export duties within the nearest three years. Cutting export duties will increase oil prices in Russia, but reduce the margin of oil refineries, both Russian and Belarusian ones, as they buy Russian oil at a domestic price without duties.

Due to the duty-free regime, Belarus now receives a transfer from Russia of $6bn (losses of the Russian budget); Belarus counted that the transfer would be increased up to $7-7.5bn, Alexander Knobel from Russia's Gaidar Institute calculated. But Belarus will suffer losses due to the tax maneuver, which will reduce the effect of the discount to zero, so it was decided to increase the discount, he explains.

“They used blackmail and it helped,” a Russian federal official thinks: Belarus said it would not join the Eurasian Economic Union if Belarus's payment were not reduced.

Teh final decision is expected to be taken at a meeting of the two presidents in Minsk on October 10, officials say.

Photo: Reuters