Minsk claims compensation from Kremlin for ratifying EAEC treaty

The Belarusian authorities might delay ratifying the EAEC treaty in order to ensure that the Kremlin envisages compensation for Belarus for potential losses from the “tax manoeuvre” in Russia’s oil industry. As in the past, the Kremlin has responded to Belarus’ claims with a threat to restrict imports from Belarus and shut down the Belarusian “food offshore”. However, neither party is interested in escalating tensions and will soon find a compromise solution, while the EAEC founding treaty will be ratified by Belarus.

The draft law on the ratification of the Eurasian Economic Union founding treaty has been submitted to the House of Representatives of the National Assembly of Belarus, amid tension in the Russo-Belarusian relations.

According to an informal arrangement, parliaments of Belarus, Russia and Kazakhstan should have “synchronised” their ratifications. The Russian State Duma ratified the EAEC treaty in late September, the lower chamber of the Kazakh Parliament – on October 1^st. The Kremlin wants Belarus to ratify the treaty in early October.

The Belarusian parliamentarians however have not given a date for the treaty’s ratification, saying that “two or three weeks will not make a huge difference”. Meanwhile, the president, while opening the Parliament’s autumn session, asked the deputies to review the document carefully, “If you see a mistake somewhere in the document, which is a very important document, please inform me immediately and do everything to protect the interests of the Belarusian state”. By delaying ratification, the president is putting pressure on the Kremlin to figure out how to compensate Minsk for potential losses from the export of petroleum products in 2015.

In May 2014, President Lukashenko signed the EAEC founding treaty after the Kremlin agreed that Belarus would keep USD 1.5 billion worth of duties on petroleum products and would receive 23 million tons of oil (21.5 million in 2014) to fully load her refineries.

Meanwhile, the Russian authorities have envisaged certain measures in order to reduce the cost of Eurasian integration, the so-called “tax manoeuvre” in the oil industry. The Belarusian president said that Belarus’ losses from such a manoeuvre would be “huge… more than USD 1 billion”. Other sources in the Belarusian government quote more modest amounts – USD 250 million in 2015, and USD 300 million – USD 400 million in the following years.

The Belarusian authorities have offered the Russian government to fully credit the Belarusian budget with export duties on oil products until 2017 and forget about the previous agreement related to exemptions from oil duties up to USD 1.5 billion.

In recent years, the Kremlin has been cutting subsidies to the Belarusian economy. In addition, Moscow has fewer resources to maintain the loyalty of the allies – due to the rising costs of confrontation with the West and deepening of Eurasian integration. For instance, the Armenian government has approved a draft agreement to join the Eurasian Economic Union, and a bill on the road map for Kyrgyzstan’s entry into the Customs Union has been submitted to the Kyrgyz Parliament.

While Belarus is considering the ratification draft, the Kremlin has started using traditional means to exert pressure on the Belarusian authorities. For example, Rosselhoznadzor has found swine fever in meat products from the Vitebsk region, and has appealed to the Government of Belarus and the Eurasian Economic Commission with a proposal for a joint phytosanitary control at the Belarusian border in order to prevent the products from the sanctions list from entering the Russian market.

The Belarusian authorities do not question the ratification of the EAEC founding treaty, however, the Parliament will delay the ratification until the matter of compensation for “oil” losses for the Belarusian budget has been resolved. In the long term, the Kremlin will continue cutting subsidies to the Belarusian economy.