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Russian Oil And Crisis of the Lukashenka's Regime

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Russian Oil And Crisis of the Lukashenka's Regime

It seems that this autumn Lukashenka and Putin will once again discuss the price of "brotherly relations".

Initially, the Belarusian authorities expected growth at 0.3% in 2016, and later changed the forecast and estimated GDP decline of 2%, and the recession has deepened to 3% due to reduction in imports of Russian oil. If the supply of black gold does not increase by half, it will ruin the game of the Belarusian government in 2017.

Things Go Bad

Official forecasts and the budget for the coming year are based oil supply equal to 24 million tons. As a result, it is expected that the Belarusian economy will move out of a recession and the GDP growth to be equal to 0.2% (with an average annual oil price of $35 per barrel) in the end of the year or 1.5% (in case of higher prices - $45 per barrel).

But there is an unknown variable that seriously affects the economic results of Belarus - Russian oil volume delivered to the country.

In January-June, 2016 Belarus monthly had 1.9-2 million tons of hydrocarbon crude, at the current rate of deliveries the Belarusian side could count on full loading of its refineries for 2016-2017.

However, in the third quarter this year the situation has drastically changed because of the gas dispute - Russia has decreased oil supply to Belarus.

According to the latest data, in July Belarus received 1.18 million tons of oil, this is 37.6% less compared with June.

In general, according to statements of the Russian side, in the third quarter Belarus will receive 3.5 million tons of oil , and in the fourth quarter even less - only 3 million tons. This is two times less than required to fully load refineries.

There is another essential aspect - oil revenue of the country.

In 2016 the Belarusian budget has intended to be replenished by more than $1.1 billion based on export duties on oil products and crude oil. Because of low prices on the world oil market in first six months Belarus earned only 770 non-denominated rubles (about $390 million) or the third part of an annual plan.

And now other factor - oil supply reduction - negatively affects the Belarusian budget.

The Price of "Brotherly Relations"

Reduced supplies of Russian oil to Belarus in the second half of the year will have a negative impact on the economic performance of Belarus and budget parameters, experts say.

"Cuts in oil supply causes reduction in production output that, respectively, negatively affects the GDP dynamics. On the other hand, cuts in oil supplies also mean decrease in revenues in the Belarusian budget, Director of the IPM Research Center Aliaksandr Chubryk says.

According to the latest released data, the GDP of Belarus decreased by 3% in January-August, and the dynamics of the index in the third quarter when Russia cut oil supplies is steadily negative.

Last week the Belarusian government planned to negotiate with Russia on the energy issue, however, Cabinet-level talks had no results.

"The settlement of the energy dispute is now a political issue. Deputy Prime Minister Uladzimir Semashka, who was instructed to negotiate with Russia last week, failed to do it, so, most likely, the dispute requires consideration at the highest level," economist Anton Baltochka assumes.

Commenting on the energy dispute this week the president of Belarus was traditionally emotional and made it clear that if the issue with oil and gas supplies were not resolved, an official Minsk could pose a question on its non-involvement in activity of collegiate bodies of the Eurasian Economic Union.

"If it continues, why do we need a bunch of bureaucrats then? There is about a thousand of them in a so-called EAEC government. What is the result?" Lukashenka asked rhetorically.

Independent experts believe: such statements have a good reason, and the Belarusian side once again wants to monetize its participation in the Eurasian Union.

"If the Belarusian goods are not allowed to the Russian market, if energy subsidies shrink like pebble leather, the question arises, what do Belarus gain by that?" Aliaksandr Chubryk suggests that this issue to be considered at the highest level.

Thus, observers have doubts that Russia will agree to pay generously for participation of Belarus in the Eurasian Union.

"Russia is now in rather difficult economic and geopolitical conditions, and is not ready to support Belarus in the volumes and provide those subsidies that were given in different forms in the 2000s", Anton Baltochka assumes.

But there is no doubt that the official Minsk will sponge the Kremlin of everything possible. And the talk will likely touch upon not only the current situation, but the future as well.

In the result of a tax maneuver in the Russian oil industry, Belarus will likely make less profit on export duties and oil price will grow for Belarus. Therefore, the Russian informed sources report, the official Minsk is going to put forward a compensation issue for losses of oil.

In general, it seems that this autumn Lukashenka and Putin will once again discuss the price of brotherly relations...

Dmitry Zayats, Belorusskiye Novosti

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