Forced integration: Russia cuts its oil supply to Belarus

Belarus has stopped selling all kinds of fuel abroad. Russian oil hasn’t been delivered to petrochemical companies for the third day. Why did Moscow block the pipeline and what consequences will the oil conflict have?

Gasoline, kerosene and diesel fuel have been banned from export “to meet the needs of the national economy”. Belarusian refineries have not received Russian oil since January 1. According to TASS, they will have enough stocks of crude oil for 20 days.

“If Russia has stopped oil supplies without warning, we can also do it with oil transit through the pipeline. It will be possible to take away this oil for a while, especially since we have not yet received compensation for the tax maneuver,” said economist Yaraslau Ramanchuk.

Sixty-six million tons of oil or 40% of Russian exports to the EU are annually transported by the Belarusian section of the Druzhba pipeline. Negotiations on the price of oil, transit fees, as well as on compensation of Belarus for the Russian tax maneuver were on until New Year’s Eve, but there were no results achieved.

“Minsk is afraid to lose some of its sovereignty and afraid of the economic integration, which Moscow insists on. Therefore, I would say that the lack of agreement, this conflict, is more serious than what we have seen in previous years,” emphasizes the analyst of the Belarusian Center for Strategic Studies BISS, Katsyaryna Shmatsina.

This is at least the sixth oil conflict for 20 years of the Russian-Belarusian friendship. Two years ago, in response to non-payment of debts for gas, Moscow reduced oil supplies by one third. The Kremlin shut down the Druzhba pipeline completely only once — in January 2007, when Moscow was outraged by transit duties imposed by Minsk.

The integration agreements that Lukashenka signed in the late 1990s gave Minsk the right to buy oil at preferential prices. But the size of the concession is defined by the two countries in tough negotiations.

“There will be no cheap oil until Belarus unifies the laws with the Russian ones in 30 areas,” said the Russian Prime Minister recently.

If Minsk adopts the Russian legislation, including the tax code, the rules, which the economy works by, will be written in the Kremlin. This is a loss of sovereignty.

If Minsk does not agree to integration, while Moscow raises oil prices to world ones, Belarus will lose up to 5% of GDP.

There is a third option – Lukashenka and Putin find a compromise, but oil is becoming more expensive for Belarus – as it was during all previous conflicts.

Katsyaryna Shmatsina believes the third option is more realistic:

“Belarus now also has got serious incentives to look for alternative ways of oil supply,” adds the analyst.

“Oil is an ordinary commodity, and the Belarusian refineries will adapt to buying it at world, not political prices,” said Yaraslau Ramanchuk.

“We can easily find 6 million tons of oil for domestic use with the help of Ukraine, Poland, and other partners. If there are technological capabilities, they should be used. And one more piece of advice to our government: we just need to turn to the international arbitration”.

Latvia has already offered to supply oil to Belarus. And while the Russian-Belarusian negotiations are underway, Russian non-governmental companies will sell oil to Minsk.

Alyaksandr Papko,

Photo: Laszlo Balogh / Reuters