Page 43 - BNE_magazine_05_2019

bne May 2019 Eastern Europe I 43
Moscow's tax manoeuvre
Russia’s tax manoeuvre in the oil industry envisages a gradual reduction in the rate of export duty on oil and petroleum products from 30% to zero in the period from 2019 to 2024 and
a proportionate increase in mineral extraction tax on oil production.
According to the Belarusian finance ministry, the country’s budget revenue losses from the tax manoeuvre in 2019 alone were estimated at BYN600mn ($300mn), and that the losses might total $2bn by the end of 2024.
However, in December, a spokesperson for Belarusian President Alexander Lukashenko said in a televised interview that Minsk already lost $3.6bn due
to Russia's cut of energy subsidies to Belarus. Belarus could lose another $11bn within the next four years.
Looming crisis
In April the World Bank has revised downward its forecasts for the economic growth in Belarus in 2019- 2021 amid growing worries about possible crisis if Minsk fails to secure full compensation from Russia for losses triggered by the latter’s new energy taxation system.
The multinational lender has revised the growth from 2.7% year-on-year to 2.2% y/y in 2019, from 2.5% y/y to 2.4% y/y in 2020 as well as from 2.5% y/y to 2.1% y/y in 2020, according to its Europe
and Central Asian Economic Update published on April 5.
The World Bank said that the country's economic growth will depend on the results of Minsk's talks with Russia
on compensation for the latter’s so-called tax manoeuvre in the oil sector. Without any compensation from Moscow, the economic growth would decelerate to below 2%, while under the worst-case scenario the country faces recession.
The Belarusian economy grew by 0.8% year-on-year in January and February following 0.7% y/y growth in January, according to national statistics agency Belstat. Belarus' GDP grew by 3% y/y
in 2018 after a 2.4% y/y expansion in 2017 after two years of recession. It contracted 3.9% y/y in 2015 following 1.6% y/y of growth in 2014.
In January, the International Monetary Fund (IMF) said that Belarus faces a new economic crisis if Minsk fails to secure full compensation from Russia and told Minsk it had better prepare
a “plan B” in case there was no money forthcoming.
According to the IMF, medium-term growth in Belarus is projected at 2%,
limiting convergence towards the income levels of richer neighbouring countries, according to the multination- al lender. However, this modest outlook is "conditional" on full compensation from Russia.
"Should compensation be significantly less than full – and this is the key risk hovering over the Belarusian economy at this stage – medium-term growth could be materially lower than 2%, and the budget and current account deficits higher than projected above," the IMF said in its statement.
Naftogaz and Ukraine’s gas wars
The gas war between Ukraine’s national monopolist Naftogaz and the Russian behemoth Gazprom is rushing towards a climax. Last December Naftogaz won a historic $2.6bn award from Gazprom at the Stockholm arbitration court, but Gazprom refused to pay and now the Ukranian energy company is trying to recover the money by seizing assets.
But the showdown between the two corporate giants will crescendo at the end of this year when Russia’s Nord Stream 2 pipeline comes online that will allow Gazprom to cut Ukraine out of the delivery loop entirely. Naftogaz' base case scenario is Russia will stop sending any gas through the Ukrainian pipelines even if Nord Stream 2 is not ready. Both companies
are building up reserves in preparation.
At home Naftogaz is fighting another set of battles. The company is in profit and the biggest tax payer to the government, but it is in the midst of reforming the energy sector, which remains for the moment uninvestable. Moreover a nasty fight has broken out between Ukrainian Prime Minister Volodymyr Groysman and Naftogaz’s CEO Andriy Kobolev.
bne IntelliNews editor-in-chief Ben Aris talks to Naftogaz’s executive director
Yuriy Vitrenko about these and other issues.
Yuriy Vitrenko
Executive director Naftogaz
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