Belarus Tries Taxing Russian Oil in Transit

Belarus, like many former Soviet republics, saw the fuel bill from Russia soar recently. Just ahead of a New Year’s Day deadline, the country agreed to pay $100 per 1,000 cubic meters of natural gas, up from $47. Yesterday, Belarus announced that all Russian oil headed for parts to the west across its territory will be taxed at a rate of $45 per ton. It’s a great idea, except that it can’t be done.

President Alexander Lukashenko, the dictator of proto-Stalinist Belarus, said that Russia had taken “very unfriendly steps” in raising the price of fuel. He explained, “If Russia, choking on this influx of petrodollars ..., is still willing to make a scapegoat of Belarus ... then let’s ask the Russian Federation --so huge and so rich -- to pay us in full for our services.”

About 20% of Russia’s oil exports, around 1 million barrels a day, flow through pipelines that cross Belarus on its way to refineries in Poland and Germany. Any increase in the price would have short-term disruptive effects as customers look for better deals. However, that doesn’t look like a possibility.

Vice President of Russian oil pipeline monopoly Transneft Sergei Grigoryev told Reuters, “Belarus cannot impose any export or additional transit duty, because the oil belongs to Russia. As for the transit shipping fee, it’s set by inter-governmental agreements, and therefore it cannot be changed without Russia’s accord.” The question becomes a matter of enforcement, and Belarus doesn’t seem to have a very strong hand.

If Belarus decides to disrupt the transit of oil to force Russia to pay this new tax, it may find itself completely cut off from Russian oil and gas supplies. January is a cold month in Minsk, and February is not any better. The Lukashenko government can’t do that. Renegotiating the transit fee is tantamount to renegotiating the December 31 price deal, and Russia won’t go for that. The tax is a great idea, but Belarus cannot collect it.

© Copyright 2007 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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