Competitive ability of Belarusian oil-processing industry in spotlight after Russia’s tax maneuver

Russia’s tax maneuver has unearthed problems with the competitive ability of the Belarusian oil-processing industry, BelTA learned from Prime Minister of Belarus Mikhail Myasnikovich at the session of the board of the Belarusian petrochemical concern Belneftekhim on 29 October.

“The so-called large tax maneuver [in the oil industry] in the Russian Federation has unearthed problems with the competitive ability of the Belarusian oil-processing industry,” said the Belarusian head of government. In his opinion, in the future oil producers will put more pressure on oil-processing companies to force the latter to improve the crude oil upgrading index.

Speaking about the volume of oil processing, Mikhail Myasnikovich remarked that as much as 23 million tonnes has to be processed in 2014 and in 2015. “Since all the customs duties [on oil and oil products made out of Russian oil] stay in Belarus as from 1 January 2015, even ‘oil for wheels’ will no longer be unprofitable,” the Prime Minister was convinced. He also stated that in the next few years Belarusian refineries should be ready to process more than 23 million tonnes. Additional capacity has to be created for that.

In mid-September 2014 Russia decided to change the terms of the extraction, processing, sales, and export of oil and oil products. The government submitted proposals to the Russian parliament suggesting the so-called tax maneuver. The proposals suggested raising the tax on the extraction of mineral deposits, including oil, and reducing export duties on oil and oil products. On the one hand, the price for oil was expected to increase. On the other hand, export duties on oil products were meant to be reduced.

Earlier BelTA quoted Head of the Belarus President Administration Andrei Kobyakov as saying that the tax maneuver had worsened the terms of trade in oil and oil products for Belarus, resulting in over $1 billion in losses.

As a result of negotiations between Belarus and Russia a government-level decision has been made to transfer all the export duties generated by the export of oil products from Belarus in 2015 to the Belarusian budget. Belarus’ budget is expected to get roughly $2.5 billion. The sum will fully compensate for the $1 billion in losses caused by the deteriorating trade terms.

At the same time the protocol to the agreement that allows the Belarusian budget to keep $1.5 billion worth of export duties till 2024 will stay in place. Only a small sum will be exempted in 2015. In other words, the agreement that was signed in May 2014 will carry on in 2016. The sides also agreed to continue negotiations on the matter in early 2015.