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28 Jan, 2010 11:30

No more privileges for Belarus on Russia’s oil export

After a nearly month-long dispute, Russia and Belarus have finally come to an agreement on oil deliveries.

Belarus has become exempt from paying duty on 6.3 million tons of crude, which is the country’s domestic consumption, and will have to pay full duty on any additional volumes.

Russian vice-premier Igor Sechin and his Belarussian counterpart Vladimir Semashko have signed an agreement, burying Belarussian hopes for a rise in duty-free oil deliveries from Russia. Belarus achieved only a future rise in tariffs on oil transit to Transneft prices. The tariff, registered in rubles, will rise, for the time being, only by 11%, but Minsk cannot hope to skim profits from processing cheap oil. This dashes hopes of Belarusian state-owned refineries to earn extra profits on the processing of cheap Russian oil and makes them look for new investors, Kommersant says.

Russia's deputy Prime Minister Igor Sechin said it was a comprehensive agreement.

“We have signed a package of documents, including amendments to an agreement on crude oil deliveries to Belarus, oil pricing procedure, and a joint statement on oil transit guarantees, so important for European customers.”

As Komsomolskaya Pravda writes, the Russian-Belarusian dispute emerged last December over the fact that Minsk disagreed to accept Russian conditions on oil deliveries in 2010. Russia suggested it deliver as much oil to Belarus as needed for its home consumption, which is roughly 6.3 million tons of crude, and that it buy any additional oil at market prices. Minsk countered by insisting that the privilege should remain in full, reasoning that the two countries are now in the same customs space since the start of the year. Otherwise, Belarus threatened to raise the tariff for oil transit via its territory tenfold.

Denis Borisov, analyst of the Bank of Moscow, calculated that, guided by the present understanding, the Russian budget will be short $1.5 billion at current oil prices. If Russia had accepted Minsk's conditions, its losses would top $4 billion. The Russian budget would have received $6.1 billion under a version of "no concessions" to Minsk, the analyst said.