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First Deputy Prime Minister Syamashka rejects Russia`s proposal regarding abolition of oil duty

First Deputy Prime Minister Uladzimir Syamashka told reporters in Minsk on Friday that Belarus could not agree to Moscow’s proposal whereby Russia would abolish its export duty on crude oil supplied to Belarus if Minsk gave Russia all its revenues from export duty on petroleum products, BelaPAN said.

Mr. Syamashka described the proposal as “the worst for Belarus.” He noted that the proposed system would be “just a little bit better than what we have now.”

“We haven’t yet signed such a deal because we consider it unjust in the conditions of a common economic zone,” Mr. Syamashka said.

According to him, Belarus annually spends $150 million to $250 million on the modernization and development of each of its two refineries, which he said means that up to 930 kilograms of light petroleum products would start being refined from one ton of crude oil as early as 2013.

“If I take money out of the budget, spend it [for modernization] and grant concessions and preferences to the refineries, why should I give up this duty?” Mr. Syamashka said.

After Russia created conditions whereby one-fourth of oil exports are free of duty and three-fourths are subject to duty, Belarus found that it made no difference where to buy oil, he said.

If all oil were supplied free of duty, Belarus would certainly purchased it from Russia, but Belarus has now the opportunity to buy oil in Azerbaijan, Kazakhstan, Venezuela and Rotterdam, and “we’ve found that it is cheaper there,” Mr. Syamashka said.

He added that the Venezuelan oil currently supplied to Belarus is of much better quality than Russian oil. The processing of Russia’s Urals crude results in 30 percent of the total amount of products being residual fuel oil, which is cheaper than crude oil, whereas Venezuela’s light sweet Santa Barbara crude yields only seven or eight percent of residual fuel oil, with the other products being much more expensive gasoline, kerosene and diesel fuel, Mr. Syamashka noted.

“We survived in this situation thanks to Venezuela,” he said. Since September, the Belarusian refineries have operated at full capacity and at a profit, he stressed.

While talking to reporters in Moscow on October 19, Russian Deputy Finance Minister Sergei Shatalov said that Russia was ready to scrap its duty on oil exported to Belarus in exchange for all revenues from Belarus’ export duty on petroleum products.