Proportionate oil supplies will help to control the commitments’ fulfillment

On March 13^th, 2013 Belarus and Russia have agreed on 5.75 million tones oil supply in Q2 2013.

Volumes and terms for oil supplies suit both counterparts. Russia needs quarterly adjustments to control the commitments’ implementation by Belarus within the Customs Union. Russia has learned from its past mistakes and regards this method of cooperation with Belarus as the most efficient to improve its impact on the Belarusian economy.

Belarusian government’s press service on March 13^th, 2013 announced the agreement has been reached regarding crude oil supply to Belarus in Q2 2013 – a total of 5.75 million tons. The supply conditions were improved. In Q1, the oil supply volume was 5.025 million tons, in Q2 – 5.3 million tons. Shipments via pipelines reduce the oil costs and improve the oil refining economy. On reciprocal terms, Russia received guarantees for 3.3 million tons supply of petroleum products, instead of the previously agreed 2.1 million tons in 2013.

Yet the annual oil supply volumes have not been signed off. Russia wants additional guarantees from Belarus regarding fulfillment of its obligations under earlier agreements, above all, concerning the joint ventures establishment. In particular, the creation of the Rosbelavto holding – a project that had not yet been implemented due to disagreements between the countries about the controlling shares. Petroleum products re-supply guarantees are not crucial – it is Russia’s insurance policy if shortage of petroleum products occurs in some Russian regions during planned maintenance works at the refinery.

In 2012, the annual oil supplies had been signed off but Belarus failed to supply the agreed volumes of petroleum products. Belarus also failed to sell property worth USD 2.5 billion. The EurAsEC Anti-Crisis Fund conditions for the loan to Belarus also were not fulfilled in full. Oil supply is the most sensitive lever of influence on Belarus due to its multi-faceted impact on the economy, both in terms of budget revenues, and the international trade. Coordination of oil supplies every three months enables Russia to increase the petroleum products volumes supplied to the Russian market, and to break the deadlock in the establishment of a MAZ – KAMAZ joint venture.

Russia has found a way to control Belarus’ actions by coordinating the supply of the most sensitive commodity for Belarus for short time intervals. Potentially, Russia could apply this rule in other areas of cooperation, in particular, to the foodstuffs supply. This mechanism is the most effective for further Belarus’ integration into Russia’s sphere of influence.