Minsk has no intentions to stop smuggling

Analysts think Minsk continues oil products supplies without paying duties to Russia.

It continues even during an investigation launched by Moscow, Deutsche Welle reports.

Russia suspects that Belarus failed to fulfill its obligations when the country sharply increased sales of solvents and biodiesel in 2012 referring to the agreement on duty-free export. According to some estimates, Russia lost about $2 million in the past year. Experts think a dispute over the issue is an undeclared “oil war”, which is likely to be won by Russia, not Belarus.

Administrative measures vs promises

Sergei Agibalov, the head of the economics sector at the Institute for Energy and Finance (Moscow, Russia), says Moscow should have reacted much earlier to omissions in the previous contract within the Customs Union that allowed Belarus to sell some types of oil products on a duty-free basis. Minsk has been using this loophole for the second year, but its appetite is growing. The expert notes Belarus hinders signing new contracts on imposing export duties on all petroleum products. Belarus have recently shifted to biodiesel export that can also be sold without paying duties to Russia under the contract.

The expert says the Russian government commission estimated the size of the damage from duty-free sales and applied to the bodies of the Eurasian Economic Commission asking to review duty rates on export of some kinds of oil products outside the Customs Union.

The analyst supposes Russia has a rather wide range of methods to influence Belarus from adjustment of volumes of oil supplies to refusal to transfer tranches of the EurAsEc loan to the country. “Objective reasons for such restrictions by Russia have already appeared, for example refusal to allow Russians to privatize liquid assets in spite of years-long promises,” Sergei Agibalov says. With such an irresponsible macroeconomic policy as Minsk has, it has no choice but to bow down to Moscow, he thinks.

“We are both right, you and me”

Kirill Koktysh, an Associate Professor in the Department of Political Theory at Moscow Institute of International Relations, notes that both sides are right in the oil products dispute. Belarus is right because under the contract within the Customs Union the country didn't violate the right to export solvents and biodiesel without paying duties. Russia is right because the oversight by lawyers in the contract led to losses for Russia's budget.

The expert explains that Belarus continues its duty-free export even when the Russian government commission works, because “the Belarusian side will use all means to get money” even during the scandal until new terms of the contract on oil products export from the Customs Union are signed with Russia. All the more so because this trade brought more than $1.5 million to Belarus in the past year, Koktysh says.

The expert notes that Russia chose a mild scenario giving Minsk a chance to “save its face” provided that Minsk unconditionally signs an additional contract on export duties. If Minsk resists, Moscow may accuse it of duty-free exporting petrol and diesel fuel under the guise of “solvents”. “It may be interpreted as violation of the agreement on refund of duties by Minsk. Belarus may face a tough scenario – imposing sanctions on the country,” Kirill Koktysh is confident.