Gas and oil in exchange for kisses
Belarusian President Alexander Lukashenko flew to the Kremlin for talks on Saturday for the second time in a week. The conversation with Vladimir Putin, closed from the press, lasted three and a half hours; no statements were made to journalists following the results. Later, the Russian leader said that he offered Lukashenko to stay to play hockey, but he, citing business, left for Minsk. In addition to Lukashenko, Armenian Maidan Prime Minister Nikol Pashinyan also visited Moscow this past week. What do these two visits have in common? PolitNavigator columnist Alexander Rostovtsev looked into it.
On June 21, the Russian government approved a tax maneuver in the oil industry. Its essence is a gradual reduction in the export duty on oil and petroleum products to zero by 2024 and a simultaneous increase in the mineral extraction tax (MET). As a result of such changes, oil exports will become more profitable, and the price of oil and oil products on the domestic market will increase.
To partially compensate for rising fuel prices, the government is going to establish a so-called floating excise tax. It will be increased for refineries during periods of low oil prices, and during periods of high prices, the tax burden on refineries will, on the contrary, decrease.
In addition, the government plans to mitigate the consequences of the tax maneuver with a reverse excise tax. This is a tax that involves the return of excise taxes on volumes of oil used for refining. Its size depends on the range of petroleum products. In order for the return of excise taxes to be maximum, the refinery must produce highly processed petroleum products.
Previously, it could be used by factories that produce gasoline in a volume of more than 10% of primary processing and by companies that were subject to financial sanctions. Now they have decided to provide it to companies that are going to modernize their refineries. The government also wants to introduce increasing coefficients to the reverse excise tax for those refineries that are located far from the border and are less dependent on exports.
The initiative to conduct a tax maneuver belongs to the Ministry of Finance and is received ambiguously even within the Russian government. Thus, the Ministry of Energy resists this innovation, motivating its objections with a likely drop in refining volumes by 20% and the closure of a number of refineries.
The Ministry of Finance explains its actions by the desire to have a deficit-free budget, and at the same time not to raise domestic gasoline prices too much.
As you know, the price of Russian natural gas is directly related to exchange prices for oil, so Russia’s partners in the EAEU – Belarus and Armenia, first of all, are very worried that the tax maneuver could hit their economies.
It is for these reasons that the Belarusian Old Man recently demanded that Putin compensate his country for possible losses and make gas prices for Belarus the same as in the Smolensk region.
Otherwise, he says, it is impossible to compete.
Things even got to the point of outright distortion when Lukashenko said that Germany was receiving gas at a reduced price compared to Belarus, to which he was given a comprehensive answer with specific figures: the Germans pay more. As a retaliatory measure, the Belarusian president was reprimanded by presenting him with facts of illegal re-export of excisable and sanctioned goods from Europe to Russia.
Perhaps the most unpleasant moment for Old Man was the reminder to him that the Belarusian side was evading the implementation of the 1999 Union State Treaty. And if so, then gas prices for the Smolensk region and the Republic of Belarus will continue to differ.
Lukashenko, in great irritation, flew to Minsk to return for the next round of negotiations on energy prices on December 29.
According to the Ministry of Finance, a rapprochement in the positions of the Russian Federation and Belarus has been achieved, but they have “nothing to add” regarding compensation or a new loan.
The Armenian Prime Minister Pashinyan recently flew to Moscow with exactly the same concerns.
The situation is quite strange. It seems that the USSR was finished off 27 years ago, everyone received sovereignty, signed integration agreements, they themselves are in no hurry to integrate, but they make their loyalty to Russia dependent on energy prices. Despite the fact that buying from outside will cost an exorbitant amount. They don’t seem to care about Russia’s internal and external problems at all (by the way, did any of these allies officially recognize Crimea? Helped in eliminating the air blockade of the peninsula?).
In anticipation of an internal conflict, internal lovers of the “European way” began to scurry among the members of the EAEU. The Belarusian zmagars suddenly felt class solidarity with the Armenian maydauns, considering them victims of Gazprom.
Thus, political scientists loyal to Lukashenko from Minsk, where they also closely monitored Pashinyan’s visit to Moscow, are promoting the following theses.
They say that Belarus and Armenia receive Russian gas at a special price - $129 per thousand cubic meters for Minsk, and $150 for Yerevan. However, the fuel is then resold to the population in Armenia by the local subsidiary of Gazprom. The new Yerevan authorities considered her markup too high. The Maidan eagle Pashinyan began to put pressure on Gazprom Armenia, and Moscow responded by sending him a new price list for gas at a price of $215.
The most interesting thing is that the Armenian side denied this information, calling it rumors, but the sediment remained. In addition, the Zmagars are confident that domestic gas prices in Belarus are also formed by the greedy managers of the local Gazprom subsidiary.
In short, it seems that we have heard this belief “Muscovites owe us life for life” more than once somewhere. And also a fairy tale that in the West buns are tastier, cheaper, and healthier.
The gas distribution scheme, however, is somewhat more complicated than humanities students and Minsk-Yerevan hipsters imagine. Yes, gas arrives at the border of Belarus at a price of $129 per thousand cubic meters. But this is a high-pressure gas that requires additional processing. At special gas distribution stations, the pressure is reduced, and the fuel itself is cleaned and dried, plus an additive is added so that the consumer can smell a gas leak with his nose.
Gas supplying organizations bear the costs of maintenance, routine repairs of gas pipelines, compressor and gas filling stations, gas equipment, maintenance of emergency services, transportation costs for delivering fuel to subscribers, depreciation of fixed assets, etc.
Also, for normal functioning, organizations need to have profits that go towards financing capital investments, production development, and paying taxes.
It is clear that all this production tediousness is of no interest to zmagars and maydowns. You can't boost the hype on it. Post-Soviet independents need simple explanations of complex issues. If gas becomes more expensive, then Russia is definitely to blame for this, and everything else is from the evil one!
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