Belarus adamant in oil export dispute

Alexander LukashenkoSource: RIA Novosti

Alexander LukashenkoSource: RIA Novosti

According to the agreement signed Monday, the Customs Code would take effect between Russia and Kazakhstan as of July 1, the original target date, while Belarus would be included starting July 6.

Meanwhile, differences remain between Russia and Belarus regarding duties on Russian oil exports. Belarus has two options: To wait until 2012, when all customs duties will be cancelled with the formation of a common economic zone, or to file a complaint with the EurAsEc court.

Now that the Customs Union is taking real shape, Kyrgyzstan and Tajikistan are also showing interest.

“Kyrgyzstan, being a member of the WTO, set up a working group to consider the possibility of joining the Customs Union, observing our country’s interests,” announced Kyrgyzstan's new President Roza Otumbayeva. Tajik President Emomali Rakhmon also voiced his country's interest in the union: “As regards Tajikistan's accession to the Customs Union, we are addressing it very seriously,” he said.

The Customs Union passed nine resolutions during the summit, including statements on export controls and the role of the union in adjudicating criminal and administrative cases.

Up to the last moment, it was unclear whether Minsk and Moscow would resolve their dispute over export duties on Russian oil and petroleum products. Last month, Belarusian President Alexander Lukashenko voiced the key condition for signing the Customs Code: Lifting customs duties on petroleum products in 2010, and customs duties on oil in 2011. However, Russia insisted on keeping the customs duties until the three countries finally create their common economic space

“Belarus proceeds from the assumption that any union, especially one among close, brotherly states – and we can say that – should be beneficial, bringing substantial benefits to the people. Our new creation, the Customs Union, should be like this. We’ll wait and see,” said Lukashenko.

Some controversy also remains following the ratification of the Customs Code.

“Belarus still believes that the creation of the Customs Union and common customs territory means lifting export duties in mutual trade. Russia and Kazakhstan—I underline that not only Russia but also Kazakhstan—believe that before the common economic space (CES) is formed and all CES-related agreements take effect, each party retains its right to collect export duties. This will end with the formation of the CES,” Russian First Deputy Prime Minister Igor Shuvalov told reporters.

This means that Belarus will have to wait until January 1, 2012, when the CES will come into effect, to see the disputed customs duties cancelled. The respective agreements should be ready by the end of this year.

“A decision was made today to speed up the effort. We must do all we can to prepare and pass the documents by January 1, 2011,” Shuvalov said.

“It is difficult to say what Minsk will be doing over the next year and a half. For Lukashenko, the issue of export duties is that of life and death,” said Dmitry Oreshkin, a political analyst and researcher at the Institute of Geography of the Russian Academy of Sciences.

Russia’s oil exports to Belarus (via pipeline and other transport) stand at about 21.5 million tons a year. Until the end of 2009, Belarus paid a 35 per cent customs duty on all Russian oil exports. Belarus re-exported the bulk of the Russian oil it received.

The situation changed in 2010: Oil needed for domestic consumption in Belarus (6.3 million tons) is supplied duty-free, while customs duties on the rest of Russian oil deliveries were raised to 100 percent, dealing a heavy blow to Belarus’ economy and state budget.

“The amount of GDP from refining Russian oil is estimated at $5 billion to $8 billion, while the country’s total GPD is about $40 billion. This means that Minsk loses about 20 per cent of its GDP every year,” Oreshkin explained.

To protect its interests, Belarus may resort to a new court, which will be created by the EurAsEc member-states. The revised provisions expanded the court’s jurisdiction in settling disputes within the framework of the Customs Union. The court’s main task is to settle economic disputes among EurAsEc’s member states and companies and to issue explanations of the organization’s documents.

Up to now, these judicial functions were performed by the Economic Court of the CIS. Lukashenko has already filed a lawsuit there against Russia over oil supplies. Citing intergovernmental agreements from 1992 and 1995, Minsk claims that trade between Russia and Belarus must be exempt from customs duties, except for crude oil. The case has been under consideration by the court for several months already.

“The EurAsEc court, like the court of the CIS, will hardly help Belarus. The principles of such organisations are based on the leadership of one country. It is unlikely that the court will be entirely independent from the key player, Russia,” Oreshkin said.

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