BELARUS NEWS AND ANALYSIS

DATE:

15/01/2007

Energy subsidies for Belarus to hit $5.8 bln in 2007 - Putin

MOSCOW, January 15 (RIA Novosti) - President Vladimir Putin said Russia's energy subsidies for Belarus would reach $5.8 billion in 2007.

Meeting with the Cabinet following a deal last week that ended a bitter energy row between the two ex-Soviet states, Putin said: "That is a lot, you have to admit. But that is the price of a calm, moderate way for allies to move to free market relations and support for a fraternal Belarusian state."

The dispute over the export duty on Russian oil supplies to Belarus and the latter's retaliatory transit fee on Europe-bound crude exports at the start of the year led to a three-day stoppage of supplies to Poland, Germany and other consumers, as Minsk tapped oil as payment for transit services.

Putin said subsidies for natural gas supplies would amount to about $3.3 billion, and for oil and oil products to $2.5 billion, adding that the latter figure had been finalized.

Citing Finance Ministry data, Putin said Russian support accounted for about 41% of Belarus's budget, which stands at around $14 billion in 2007.

Putin said that although Russia would continue to subsidize Belarus's economy, subsidies would start to decline this year.

"Russia will continue direct or hidden support for the Belarusian economy for a long time, but starting from this year that support will decline considerably," the president said.

He called Friday's agreement with Belarus an acceptable compromise, highlighting the onset of market relations, above all in the energy sector, between the allies, which are trying to forge a union state.

The dispute was resolved, when Belarus lifted the transit duty and Russia later cut its export duty from $180.7 to $53 per metric ton, effective from January 1, 2007, alleviating unpalatable consequences for its neighbor, which has relied heavily on receipts from refining and re-exporting Russian oil.

Belarus's Deputy Prime Minister Andrei Kobyakov said that the six billion metric tons of oil Belarus was to receive from Russia for domestic consumption would be duty-free, whereas the remaining 14 billion metric tons to be refined and re-exported would be subject to the new duty.

He also said Belarus would revise its export duty for oil products shortly to bring it into line with Russian figures.

Russia has complained of huge losses inflicted on its budget from crude supplies to its western neighbor. Belarus refined oil and re-exported it to third countries, paying no taxes to the Russian budget in the process.

As of 2007, Russia also canceled a preferential price for natural gas supplies to Belarus, doubling it to $100 per 1,000 cubic meters, in line with its drive to gradually bring gas prices for former Soviet satellites closer to European levels.

Source:

http://en.rian.ru/world/20070115/59085196.html