Page 8 - BELRptFeb19

and ensure that there are stable and fair conditions in the fuel and energy sectors within the EEU," he said. "There are no interests of suppliers and consumers of energy resources in allied relations. There is an integral system – the Eurasian Economic Union."
He said that he completely agreed with the Russian president that it was necessary to develop new areas of cooperation, including in the fields of nuclear power and renewable sources of energy. "But the lack of consensus on principles for creating a single market of oil and gas does not allow the EEU to progress at a faster pace," Lukashenko added.
'Plan B'
In November, the International Monetary Fund (IMF) warned the Belarusian government to prepare"contingency plans" if energy negotiations with Russia fail. "Although the government sees a low probability of less than full compensation for the tax manoeuvre losses, contingency plans would be helpful if such an event were to materialise," the IMF said in a statement.
According to the multinational lender, in such an event, oil-refining activity would be reduced, dampening export revenue and growth. Tax revenues would also be hit due to lower economic activity, lower transfers from Russia, and lower customs duties.
The policy response should aim to mitigate the impact on the balance of payments and facilitate the reallocation of resources in the economy, including structural reforms. "The loss of energy discounts would underscore the need for faster and deeper reform to boost productivity in SOEs, not least in the refineries," the statement reads.
Meanwhile, the IMF believes that exchange rate flexibility to allow the needed adjustment in the balance of payments, supported by fiscal discipline to refrain from untargeted and costly subsidies to the refineries, and with additional measures as needed to maintain debt in a downward trajectory.
At the top of that, tighter monetary policy to maintain inflation within target and limit undue volatility in the foreign exchange market, the multinational lender added.
2.1 Russia to cut Belarus energy subsidies
Russia’s so-called tax manoeuvre will mean the Belarusian government will lose some half a billion dollars in income starting in January 2019 when the new tax rules come into effect, and has led Belarus’ President Alexander Lukashenko to make some strong statements, including accusing Moscow of attempting to annex his country.
These sorts of remarks are par for the course for Lukashenko who remains tightly bound to Moscow’s orbit. Nevertheless the growth of the economy and the emergence of a middle class are slowly transforming the republic. And the changing relations with Moscow mean that Lukashenko has become more open to the rest of Europe, which remains a major export market. The most obvious sign of this thaw is Minsk’s decision to introduce almost visa free entry to the republic (if you arrive at Minsk international airport) in defiance of Moscow, as there is supposed to be borderless travel between Russia and Belarus under the terms of the Eurasia Economic Union (EEU). Russia responded by reintroducing passport controls on the border.
8 BELARUS Country Report February 2019 www.intellinews.com