Why Putin wants to sell Russian oil field to Belarus

Vladimir Putin buys Alexander Lukashenko's loyalty by supporting his idea of acquiring an oil field in the Russian Federation, expert Sergei Pikin believes.

Putin buys Lukashenko's loyalty

On Wednesday, BelTA news agency, citing the press service of President Alexander Lukashenko, reported that Vladimir Putin, in a telephone conversation with his Belarusian counterpart, supported his idea of acquiring an oil field in the Russian Federation by Belarus.

"The President of Belarus turned to his Russian counterpart with a request for a possible acquisition of an oil field in Russia. Vladimir Putin supported this idea," BelTA informs.

Sergei Pikin, the chairman of the Energy Development Fund, told Pravda.Ru that this is a political step, in which Putin is "buying Lukashenko's loyalty."

Oil and gas resources still remain Russia's prime trump card in the negotiations between Russia and Belarus on integration processes, because Belarus does not have such resources, Sergei Pikin said.

As for natural gas, it goes about the price, and it is unlikely that anything can be changed here, because Beltransgaz is the property of Gazprom, not Belarus, he noted.

Oil is everything for Belarus

"Oil is important. Belarus refines most of its oil it gets from Russia and then sells it for export. Therefore, it is important for Minsk to receive oil at minimal costs in order to get the maximum margin in exporting and refining it. I don't think it will be super attractive projects that our giant companies can not develop themselves, but Belarus may have interest in the deposit that Russian companies show less interest in," Sergei Pikin said.

The possibility of acquiring an oil field by Belarus will be work developed in cooperation with relevant departments, Putin's official spokesman Dmitry Peskov told reporters.

In early January, Belarus planned to reduce oil imports from Russia to 30-40% of its needs. Alexander Lukashenko put the question to Moscow bluntly: either Russia sells oil to Belarus at a discount or there will be no integration within the Union State.

In 2019 alone, the duty-free price on oil that Belarus buys from Russia (24 million tons) saved the country about $1.67 billion. The country processed 18 million tons at its refineries and exported the rest of the oil, and Minsk derived profit from the duty (about $ 418 million) for itself.

However, the ongoing tax maneuver in the oil industry in Russia nullifies duty-free trade, as the proceeds from the mineral extraction tax (MET) increase proportionally.

Even if Belarus acquires a deposit in the Russian Federation, it will be forced to pay the MET, which will sharply reduce the margin. This once again proves the political nature of the statements of both leaders.