Russian Railways blocks naphtha supplies to Belarus

Belarusian companies have to suspend production of sublimated products from Russian naphtha.

Interfax-West news agency received this information from a representative of a Belarusian oil company.

“The Russian Railways company [Russian's national rail carrier] does not give permission for acceptance and shipment of naphtha of Russian oil traders. De facto, supplies of raw materials to produce solvents and thinners were blocked. Production was suspended in Belarus,” he said.

He also says: “An interdepartmental commission of official representatives of Russian governmental agencies, including the Federal Customs Service (FCS), worked in Belarus this week to check the legality and transparency of production and export of solvents and thinners. The results of commission's work are being heard in Moscow today. We expect the Russian side to make official decisions in the nearest time.”

He supposes Belarusian traders continue producing oil products from the rests of batches of naphtha, but notes are no new supplies.

Argus, an international provider of energy sector price information, reports with a link to traders that  Russia suspended naphtha shipments to Belarus. “There were no formal restrictions, but suppliers read this in the eyes of the Prime Minister as he appeared on TV,” the agency cites one of the traders. Market players say the future of naphtha supplies to Belarus is undefined. July batches were shipped, but there are no plans to make supplies in August.

Belarus uses Russian naphtha to produce solvents and thinners, which the country can export on a duty-free basis. Exports of these petroleum products exceeded 2 million tones during five months in 2012 having reached about $2.2 billion. Russian government repeatedly raised concerns about the sharp increase in solvents and thinners export from Belarus. Russian officials made public statements  suspecting Belarus of re-exporting Russian oil products without paying export duties to Russia's budget. Russian PM Dmitry Medvedev expressed a desire in Minsk on June 18 to “look into” the issue.

Traders earlier expected imposing duties on oil products that are actively exported via the Baltic Sea terminals.

Production and export of solvents and thinners, which are formally not oil products, and export of products from Russian oil are among the main sources of Belarus's economic growth and foreign trade surplus this year.