Biodiesel gives even easier profits than “dissolvent”

Lukashenka has basically admitted smuggling Russian petroleum products labeled as dissolvent and diluents to the West.

He said that in an extended interview to the TV and radio company Mir.

Meanwhile, Lukashenka himself doesn’t see anything illegal in this scheme, Radio Svaboda reports.

For the first time Lukashenka gave a public feedback to Russia’s accusations of Belarus exporting petroleum products without paying the fee the Russian budget. According to Lukashenka, all this fuss is completely groundless, because even if Belarus gets some profit from this business, it doesn’t surpass 0,01% of Russia’s incomes. Moreover, Lukashenka is convinced that Minsk has never breached any legislation, neither Russia’s, nor the Common economic space’s. It is all about biodiesel, not dissolvent. He claims that Russia has difficulty producing pure diesel fuel because there is no production means of the required depth, and that is why the businessmen went via Belarus. “But even that isn’t appreciated”, the leader is amazed.

”What is biodiesel? We got from you (Russian companies) high-sulfur diesel oil, and we paid, as it has been made clear now, 15-20% above the market price. That’s why it was profitable for you to get this diesel oil sold. We shipped it to our plants, removed the excessive sulfur, produced biodiesel and sold it. As it turns out, we didn’t sell much of it. And you have attacked us. Why? For having taken your goods, produced our own goods and sold it to someone, having paid all taxes, fees and so on?”

According to experts, the attempts to shift the attention from the dissolvent issue to biodiesel are natural: in this case, smuggling is not as obvious, even with the same export scheme where fees are not paid to the Russian budget. Economic observer Aliaksandar Gierasimienka says:

”Along with dissolvent, it was a good, basically legal way to export petroleum products without paying the fee. See for yourself: they add 3-5% of biofuel to ordinary petroleum diesel oil, they get “biodiesel”, and then they can export basically unlimited volumes of the product labeled this way, without having to pay the fee to Russia. This is an ideal scheme. Both dissolvent and biodiesel have the same significance here, because biodiesel is not affected by the fees that we must pay to Russia. Moreover, biodiesel is an even simpler and more legal scheme. For example, there can arise  an argument around the dissolvent issue: regular petroleum can be shipped as dissolvent. But with biodiesel, it is super easy – just add some methyl-ether acids from raps oil produced by Grodna Azot, and it’s done, no fee to pay. And the risk to be accused of fraud is much smaller.”

Already in spring Russia expressed suspicions about Belarus smuggling petroleum products labeled as fee-free petrochemical goods. According to the official data, during the period of time between January and May, Belarus exported approximately 2,5 mln ton dissolvent and diluents for $ 180 mln. Meanwhile, the demand of the global market is under 1,5 mln ton. Head of the economic department of the Russian institute of Energy industry and finance Sergei Agibalov said, that biodiesel wasn’t included to this statistics, which leaves room for grey schemes. If Belarus has actually made no breach in its biodiesel export, as Aliaksandar Lukashenka claims, why was it sold as dissolvent and diluents?

”This is still a complicated issue. The way the Belarusian party will show that it is not engaged in such matters anymore, is crucial. So the question is still partially open. I believe that Russia expected some other steps from Belarus. Anyway, this is a result of several factors. There are objective reasons, such as decrease in the requirement of raw oil when Mazyr Oil Refinery is closed for renovation. But there are other reasons. So now it is difficult to forecast what will happen, because it’ll be interesting to see official comments after Lukashenka’s statements. No comments normally trigger suspicion, and those who are watching the situation can get different ideas, when there is no additional information,” the expert said.

According to analysts, Russia who is losing billions of dollars in the ally’s trade schemes, doesn’t want to elaborate on the Belarusian smuggling, because in doing so Russia will have to admit that the integration structures, such as the Customs Union, Common economic space or the Eurasian economic space, are involved in unfair games. And such notorious fame will make it hard to recruit new members.