While most observers focus on the current turmoil in global oil markets and the resulting steep price decline, Belarus is currently facing an additional challenge. By the end of 2024 the price of oil imported by Belarus from Russia will increase by 30% due to a reform of oil taxation in Russia – the so-called “Russian tax manoeuvre”. It is clear that the manoeuvre will have a significant impact on the Belarussian economy – especially on its oil refineries which contribute significantly to exports and budget revenues. An analysis by GET suggests that the main impact will stem from increasing prices for fuels on the domestic market as refineries pass on the higher cost of oil which is bad news for private households and companies alike.
Worse though will be the situation for refineries when exporting fuels as they cannot increase their prices as this would inevitably lead to a loss of market share. Instead refineries will be forced to absorb the entire oil price increase. The resulting losses for refineries are expected to reduce GDP by 1.5%.
The main impact however, will be on public revenues which are likely to decline by as much 15% once the tax manoeuvre is completed in 2024 compared to the situation without the manoeuvre. The only good news amidst such a bleak outlook is that there is still time to enact decisive reforms such as privatisations of state-owned enterprises and the diversification of imports and exports (including for energy) to mitigate the worst of the impact.