Just beginning? Russia’s tax maneuver to hit Belarus budget

Multibillion budget losses and foreign debt problems. It is the consequences that Russia’s tax maneuver may carry to Belarus. The Russian Finance Ministry has recently avowed its determination to put it into practice. Why is Moscow eager to deprive Belarus of an oil dropper?

In seven years, Belarus will lose subsidies in the form of cheap Russian oil, Alexey Sazanov, a representative of the ministry, said in an interview with news agency Reuters.

“There will be the end of hidden subsidies. Previously, it was a ‘shady area’, when money was lost by the federal budget of Russia, but received by refineries in Belarus. Now we are observing a significant ‘whitewash’ of relations in this field, and it is very good,” he stressed.

Russia counts on completing the tax maneuver by 2025. The domestic oil price will rise to the world market level. The Russian government is set to take in money to their budget not when the fuel is exported abroad, but at once – through a tax on the extraction of minerals. The tax maneuver is inevitable.

“The doctrine of financial determinism has been accepted in Russia. They are trying to refill the budget by all means, to get any income. The tax maneuver has been in progress fors year. Fuel excises are increased in accordance with the plan. The tax on mineral resources extraction is increased in accordance with the plan,” Russian economist Vladislav Zhukovsky said.

In addition, Moscow will stop delivering oil products to Belarus. Minsk purchased up to 2 mln tons of cheap Russian fuel, which was sold in the domestic market, but it sold gasoline produced in Belarus abroad, Sazanov told Reuters. Moscow estimated its losses at $150 mln (for 6 months).

Last year Belarus managed to save half a billion dollars on cheap Russian oil.

“In 2019-2015, as a result of the tax maneuver, Belarus may lose $3 bn. Secondly, the termination of the scheme of Belarus ex-deputy PM Uladzimir Syamashka [selling Russian crude oil abroad] will also be a financial hit,” Belarusian economist Leanid Zlotnikau believes.

Russia has been reducing its oil subsidy to Belarus over the last decade. Belarus still gets cheaper gas, but it is not enough to revive the economy, experts say.

“We will have difficulty paying off foreign debts. Before the year of 2025, we will have to give back about $3.5-4 bn per year. Earlier, Russia helped us make good on the debts, but from now, it will become more painful year by year,” Zlotnikau stressed.

According to Russian media, Moscow is tired of Alyaksandr Lukashenka. It is the oil issues of oil, not those of geopolitics, that have become a bone of contention in Moscow-Minsk relations, Belarusian political analysts believe.

“The main purpose of cutting oil rent to Minsk is Moscow’s saving money on its ally who does not show ‘union sentiment’ anymore. Now we will have to bargain for every subsidy,” political analyst Artsyom Shraibman explains.

Years of wheeling-and-dealing between Lukashenka and Putin are to come, experts predict. And the current conflict is nothing but the beginning of high-profile ‘family’ scandals.


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