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Russia offers compensation to Belarus for oil duty losses

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Russia offers compensation to Belarus for oil duty losses

Highlights

Duty row has hampered crude flows

Proposals to change the oil price formula

2020 Russian oil supplies seen at 24 million mt

Belarusian President Alexander Lukashenko said Friday his Russian counterpart, Vladimir Putin, has proposed a mechanism to compensate Belarus for lost earnings on oil customs duty, Belarusian news agency Belta reported.

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Disagreement on the issue has prevented Russia and Belarus from agreeing on the terms for Russian crude supply to Belarus in 2020, leading to a significant drop in crude deliveries and Belarus seeking alternative suppliers.

Belarus' revenues from customs duty on oil have fallen as a result of changes to Russian taxation.

"Putin proposed a formula to calculate how much we will lose from lower customs duties in 2020, compared to last year's levels," Lukashenko said.

"If we received $1 billion from duty last year, let's say, and this year we'll get $700 million as a result of reduced duty, (it's always decreasing). He [Putin] said we will compensate $300 million, including through premiums for [oil] companies," Lukashenko added.

Russian energy minister Alexander Novak said Friday that Russian companies have made proposals on changing the oil price formula to their Belarusian partners that would partially offset the effect of the fall in export duties.

"An approach was proposed that takes into account the reduction in export duties, namely a reduction in premiums of approximately $2/mt each that is in proportion to the reduction in export duties," Novak said.

Russia supply slump

The Kremlin also issued a statement about the call, describing it as a continuation of talks held earlier this month in Sochi. The statement said that particular attention was paid to energy cooperation and the implementation of major joint projects during the call, but provided no further details.

Lukashenko said that the proposal would go some way to resolving the dispute, with the main issue whether Russia is prepared to maintain Belarusian oil revenues at the same level as last year.

Lukashenko said he had ordered his prime minister, Sergei Rumas, to study the proposal and work further on the issue, Belta reported.

Crude supplies from Russia to Belarus fell by 76% between December and January, from 1.7 million mt, to 407,200 mt, according to data released at the start of February by the Central Dispatching Unit of the Russian Energy Ministry.

Belarus has discussed alternative supplies with the Baltic states, the US, Saudi Arabia, the UAE, Azerbaijan, Kazakhstan and Ukraine. It has received an 80,000 mt shipment from Norway.

In December, Lukashenko said Russia had agreed in principle to supply 24 million-25 million mt of oil to Belarus in 2020. Russian pipeline operator Transneft said in mid-January that it expects supplies of Russian crude to Belarus this year to be 23.5 million mt.