Belarus's mis-labelling of fuel exports costs Russia $1 billion

Thu Sep 27, 2012 10:49am EDT
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By Richard Balmforth and Andrei Makhovsky

MINSK (Reuters) - Belarus has dodged about $1 billion in customs duty payments to Russia this year by exporting gasoline and other oil products under the guise of solvents and thinners, official data shows, infuriating Moscow.

Authorities in the small ex-Soviet republic say that, after a sharp rebuke from Moscow, they have now ended the practice.

A Russian government source, however, told Reuters in Moscow that Belarus was still violating the terms of its preferential trade status.

The affair will strain even further Belarus's on-off relations with its former Soviet master, whose energy supplies keep its economy afloat. But Russia, which has a strategic interest in keeping its troublesome ally in its sphere of influence, may either quietly kiss off the loss or hold the affair as a trump card to play in future dealings.

Russia, which collects hefty export duties from sales of crude oil, does not levy duty on oil supplies to Belarus and Kazakhstan because they are foreign trade allies in a Moscow-led customs union.

In return, however, these countries are expected to repay to Russia most of this duty if they refine the imported oil and export it as fuel and other oil products. The duty repayable on gasoline exported to world markets is 90 percent of that for crude.

But, in a move highlighting the unusual political and economic relationship between the two countries, Belarus this year began exporting oil products which figured in cross-border customs documentation as "complex organic solvents", the Russian government says.

Under customs union regulations, solvents and thinners can be exported to world markets duty-free.   Continued...