Barys Zhaliba: Kremlin hits Belarus's most sensitive spots

Moscow's stance on oil supplies cuts to Belarus will remain unchanged until Baumgertner is released.

Economist Barys Zhaliba spoke to charter97.org about Siamashka's scheduled visit to Moscow to discuss oil supplies.

“The reduction in oil deliveries undoubtedly has political reasons related to the arrest of Uralkali CEO. Russia had to react to this step and it did it. The Kremlin hit the most sensitive spots of Belarusian economy, first of all, oil. Russia announced the reduction in oil supplies, though the issue was not a problem before. The countries have arrangements for quarterly deliveries. Belarus bought an average of 5.25 million tonnes of oil a quarter. But Moscow recalled the old figure of 18.5 million tonnes and said it would ship only that volume by rail, not via a pipeline,” the expert noted.

The expert is confident that the further developments depend on whether Baumgertner will be released or not.

“I think Moscow's stance expressed by Dvorkovich at the meeting with Siamashka will be unchanged. If oil supplies can be resumed only after the release of Baumgertner, the situation in the potash market cannot be recovered. Losses are inevitable. Of course, it will cause tension in the domestic foreign currency market with all that it entails. Russia sells Belarus oil for $400 a tonne. But Belarus produces oil products and sell them for more than $700 a tonne,” the economic stressed.

He added that losses from oil supplies cuts would be huge.

“Now we may face the most serious losses in the potash market. Some estimates show that we will lose one billion of dollars by the end of the year. Anyway, the damage in the potash market will reach hundreds of million dollars. We can expect the same in the oil market if the situation doesn't change. The reduced deliveries of oil will affect fuel costs in Belarus's domestic market. Earlier, prices grew together with the inflation rate, but now we have an additional reason for a new increase in fuel prices. I think they will rise by the end of the year,” Barys Zhaliba sums up.

We remind that Belarusian Deputy PM Uladzimir Siamashka wants to meet with Russian Deputy PM Arkady Dvorkovich in Moscow. Russian oil supplies to Belarus is usually among the main topics on the agenda at meetings of deputy prime ministers.