Russia Decides to Stop Oil and Gas Games with Lukashenka, Economist Says

No more cheap energy is available for the dictator.

It has become known that Russia has not agreed to supply Kazakh oil to Belarus. Lukashenka stated that yesterday at a meeting on the export of oil products.

A day before it became known that Belarus had purchased a small batch of oil in Norway (80 thousand tons). According to experts, taking into account transportation from the Baltic ports, the Norwegian oil will cost Belarus much more than the Russian oil.

It will be recalled that Russia stopped supplying oil to the Belarusian refineries on January 1. Small supplies from private companies of Mikhail Gutseriev, the authorities managed to agree to before the end of January, are enough only for the refineries to operate at the minimum load mode.

How can events on the "oil front" develop and how can it end for the Belarusian economy?

Economist Leu Marholin answers the questions of Charter97.org.

- How would you comment on Russia's ban on the transit of Kazakh oil through the country?

- Russia has decided to stop oil and gas games with Lukashenka. Transit of Kazakh oil through Russia is now what Russia is interested in.

Besides, the oil pipelines are quite loaded. There is a reason why oil from Russia was partially supplied to Belarus by rail even in the most fruitful years.

In other words, Russia has made it clear that negotiations are required and no other options are available. At least, it concerns the routes regarding transit through Russia.

- The current "oil and gas" war with Russia is not the first one, but the Kremlin has not yet gone so far in this regard. What is the peculiarity of today's conflict?

- In my opinion, this conflict has several peculiarities.

The first is the situation in Russia. Fruitful years have fallen into oblivion for Russia. Now it has to watch the money.

The second point is that the origins of the current war lie behind the political turmoil and "misunderstandings" between Russia and Belarus. They have started with the so-called tax manoeuvre, which indirectly relates to Belarus. This is the desire of Russians to regulate the life of their oil producers and refiners so that they could share their incomes with the state more or less fairly.

In my opinion, the fact that Belarus got into hot water by chance. The Belarusian authorities were offered: "If you want this tax manoeuvre to affect you, let's integrate. If you don't want, you can buy oil at world prices". Moreover, given transportation, even if Belarus buys Russian oil at world prices, it will still be cheaper than any oil that can be bought in another country.

- Can a small batch of Norwegian oil help the Belarusian authorities?

- I think it's more of a demonstrative political action. There are no problems either with the purchase of oil or with its delivery. One can buy and deliver it as other countries do. Japan, for example, has no oil and it does not prevent it from developing.

The problem is that everything is being done to somehow get preferential deliveries from Russia. Let it not be the same as it used to be, but still, it wants some kind of privilege for official Minsk to remain.

Will it be reachable? Frankly speaking, I doubt it. Russia has already demonstrated this unavailability. Every country, which considers itself independent, sovereign, should take care of its interests and not rely on someone's "brotherly" help.

- Experts note that any alternative oil will be more expensive than the Russian one for the Belarusian authorities. Is it possible to say that diversification time is wasted?

- It may sound weird now, but I believe that Belarus has never needed any alternative oil. First of all, there is no problem with alternative oil. It is sold freely on the market. One can purchase on the spot market, let's say, in advance, with risk hedging.

One can do anything one wants: the oil market is free and ramified. But neither before, nor even now anyone in this market can offer Belarus conditions that are at least comparable to those we had with Russia.

As they say, there are no fools. If your neighbour sells you something at a halved price, what's the point of looking for it somewhere else? You know very well that if your neighbour refuses to sell you at the halved price, you may buy it at market value.

Another thing is that our unreformed economy, oil refineries, which Lukashenka loves to boast (as far as I remember, they have been "reconstructing" for the last 20 years), give no such an opportunity.

Our refineries have never reached the refining level typical for the best European and American refineries. This is a major problem. If the yield of oil products is at least 1-2% lower than that of the enterprises in the neighbouring countries, the economy of this processing will be worse by 1-2% and the profitability of these refineries will be lower.

Given that these refineries have to sell their oil products at the domestic market either at a loss or without considerable profit, their dependence on cheap Russian oil becomes understandable. European refineries sell oil products about twice as expensive or even more on the European market. However, no miracles happen in the world. If we sell cheaper than we should, it has to be compensated.

We used to compensate for it by cheaper oil. Now, these times are over.

- How can events develop in connection with the appointment of a new government in Russia and changes in the Russian Constitution? Can it indicate a more pragmatic approach in the Kremlin to its "ally"?

- I think the situation will only get tougher for Lukashenka.

If Medvedev still had some political weight and could make some decisions or at least express his opinion on the matter, the new government will be technocratic and make all decisions with a calculator in its hands.

It makes no use to sell oil to Belarus at a low price. Therefore, Putin will personally make decisions. He will decide whether he wants something or not.

There must be very strong incentives for him to want it. If you remember, a few years ago Russia tried somehow to take away more or less valuable assets from Minsk (I mean the Wheel Tractor Plant, and Grodno Azot, and some other enterprises). Now it is behind concern. Now it's not only about the integration.

Amendments to the Constitution of the Russian Federation demonstrate that Putin has decided on the mechanism of transformation, and Belarus has already receded into the background in this mechanism.

What arguments should we deliver to persuade Russia to grant us some benefits? I think it is hardly possible for Lukashenka in the current situation.

- How all these processes may affect the Belarusian economy in the near future. What risks can it bring?

- It will have a negative effect. If there are dramatic overhauls, the economy will stagnate. Stagnation can last for years. The collapse of the GDP, as it was in 2014, may happen.

People will have to adapt somehow. This is already happening. People go abroad to earn money. We have not yet reached the level of Moldova of the first decade of the XXI century. So the authorities have the way to "follow", but it will bring no good.

- While appointing new heads of law enforcement agencies on January 20, Lukashenka mentioned "hard times". How hard these times are for the Belarusian ruler?

- Has he once had fruitful years? It means carrying out necessary reforms and putting the country on rails of self-sustaining market development. After that one can sigh with relief.

There will be no fruitful years if the country is under manual control for 25 years. It will be really difficult, but we have always managed to adapt somehow. We have very few people relying on the state now.

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