30.09.2005 - 09:58 CET

EU oil trade profits Minsk regime, NGO says

By Andrew Rettman

EUOBSERVER / BRUSSELS - The EU could strike a direct blow against the Minsk government by blocking oil exports from Belarus according to a new NGO report, but there is no talk of trade sanctions in Brussels despite simmering political tension.

"Prohibition of oil product exports from Belarus...would undoubtedly strike the economic interests of Belarus as well as the private economic interests of members of the highest leadership in Belarus (presidential administration and government)", the Bratislava-based Pontis Foundation said.

The foundation, which is part-funded by the EU, states that Belarus buys crude oil from Russia at preferential prices and sells refined oil products at market prices to EU partners, with the Netherlands and UK gobbling up the largest share of fuel.

"Exporting of oil products from Belarus to EU markets is to a great extent done through corporations which are financially connected to Russian companies", the study added. "People with direct contacts to the Belarusian presidential administration and government likely stand behind these companies".

Eighty percent of Belarusian oil products are currently sold to the EU, which could be worth up to ?3.3 billion this year due to the current spike in fuel prices, accounting for five percent of Belarusian GDP.

Pontis says the figures are based on Belarus government sources, but were provided to the foundation by independent Belarusian economists that cannot be named for fear of state repression.

The country also exports large amounts of chemicals, ferrous metals, textiles and wood products to Europe, with the unnamed Belarusian economists hinting that a blanket EU trade ban could destabilize the Minsk regime by causing inflation and unemployment to soar while disabling the government from paying wages and pensions.

Figures questioned

Pontis' study is currently being circulated among European Commission and member state officials, but is not likely to stimulate concrete action.

The Dutch foreign office said the Belarus trade statistics calculate oil trade with the Netherlands on the basis of all transactions made through the international port of Rotterdam, no matter where the goods end up.

"Actual bilateral trade is quite low", spokeswoman Judith Maas said, with the total value of all Belarusian exports to the EU last year standing at ?2.7 billion according to Eurostat.

Ms Maas added that "Like the rest of the EU we believe trade sanctions would primarily impact the Belarusian people while doing little to promote democratisation. But we fully support existing diplomatic measures such as the visa ban on selected Belarusian politicians".

The Netherlands' view is shared even by the strongest critics of president Alexander Lukashenko's government, such as Poland.

An EU diplomat said he "would not rule out" that Belarus might get kicked out of the EU's Generalized System of Preferences (GSP) on trade in due course, but a GSP expulsion would not impact Minsk's oil activities.

European Commission trade spokesman Stephen Adams explained that GSP members benefit from around 3 percent lower import tariffs on products such as textiles, with an expulsion having a potentially "serious" effect on trade.

But there are no tariffs on oil products imported to the EU in any case.

Brussels is currently waiting for Minsk to offer a formal commitment to comply with international trade union standards, or face expulsion from the GSP in late 2006 or early 2007.

Political atmosphere tense

Meanwhile, enlargement commissioner Olli Rehn showed support on Wednesday (28 September) for the latest European Parliament resolution condemning Belarus' human rights abuses and calling on member states to raise the Minsk issue in bilateral relations with Russia.

Standing in for external relations commissioner Benita Ferrero Waldner who was on her way to Libya, Mr Rehn said, "We have recently seen a worrying deterioration in the situation" and expressed a hope that Brussels' support for the pro-democracy movement in Belarus might help bring about "a turning point in the country's destiny" at the July 2006 presidential elections.

The resolution, the MEPs' fifth on the subject since enlargement, was water off a duck's back to Minsk, however.

"It hasn't changed much", a Belarusian diplomat indicated.

The source said Minsk is likely to issue the formal GSP compliance commitment before the EU deadline elapses in Spring next year, while describing the prospect of GSP expulsion as potentially "creating slight difficulties in the conditions for our exports".

He said that while Belarus buys natural gas from Russia at around 50 percent of market price, it buys crude oil at "just a one or two dollars" less than normal levels, with the strong links with Russian firms based on Belarus' advanced refinery capacity at facilities such as Mozyr.

"I believe the EU is very interested in importing our oil and raw materials, especially now that the prices are so high", the diplomat stated. "The EU would not like to lose this quite important source".