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September 3 – September 9, 2012

Aliyev’s visit marked the end of Venezuelan oil supply project

The situation has not changed
Aliyev’s visit marked the end of Venezuelan oil supply project

During the visit, many agreements on cooperation between the two countries were signed. However, their insignificance and the low foreign trade level between the two countries suggests, that the main purpose of the visit was to close the biggest deal between the two countries in recent years: cooperation on oil supply using swap schemes.

On August 28-29, Azeri President Ilham Aliyev visited Belarus and met with Alexander Lukashenko.

There is a broad list of agreements signed during the visit, but the most important is the inter-governmental agreement on the creation of favorable conditions for the leasing expansion. The remaining agreements are mostly formal and could be signed by other high level officials. A statement about joint export to third countries is not more than a declaration of intent. 94.5% of Azerbaijan’s export (USD 26.6 billion) is energy products. Azerbaijan hardly needs assistance of Belarus to export its gas.

It would be difficult to maintain upwards dynamics in foreign trade. Excluding oil supply, in 2011 imports from Azerbaijan totaled USD 9.3 million; in 2012 Azeri oil supplies have been suspended and imports were worth about USD 6 million in the first five months. Exports from Belarus to Azerbaijan increase, but even overcoming the USD 200 million threshold will not help keeping up the bilateral trade volume achieved in 2011.

Currently further cooperation using swap schemes is impossible. Venezuelan oil price is well above the price of Russian oil in 2012. Capacity of Belarusian refineries reached 100% and there is no economic feasibility for oil supplies using a difficult route. Moreover, experts raised many questions regarding oil supplies using swap agreements due to the supplies’ inarticulate logistics. Tankers demurrage and Azeri oil shipping via suboptimal routes significantly undermined the deals’ economy.

Therefore the visit of Ilham Aliyev probably marked the end of multilateral cooperation on oil supplies. Recent visit of President Lukashenko to Venezuela in a way ended one part of the deal, and the visit of the President of Azerbaijan put an end to the entire project.

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Once a week, in coordination with a group of prominent Belarusian analysts, we provide analytical commentaries on the most topical and relevant issues, including the behind-the-scenes processes occurring in Belarus. These commentaries are available in Belarusian, Russian, and English.
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