Medvedev: Russia Hasn’t Promised Belarus Relief over Oil Tax Overhaul

Moscow has never promised Belarus any help over losses incurred due to an overhaul of Russia’s oil tax after Minsk requested compensation, Russian Prime Minister Dmitry Medvedev said on Monday, according to RBC.

“I want to remind you once more that, first of all, we have never promised anyone to compensate for other countries’ lost profit, even to the ones who are very close to us,” Medvedev told a government meeting.

Belarus has long been kept in Russia’s sphere of interest by Moscow’s energy subsidies and loans but the Kremlin now plans to phase these out to lessen the burden on its economy which has been squeezed by Western sanctions since its 2014 annexation of Crimea.

Russia, Belarus and Kazakhstan have a duty-free arrangement under which Moscow has been sending crude oil and oil products to Minsk with no export fee. Belarus then re-exports some of those goods, pocketing the associated charges.

However, on January 1 Russia said it was stopping the subsidies as it amended its tax code.

Medvedev said Russia is continuing talks with Belarus in relation to its oil tax reforms. Belarus estimates it will lose $300-$400 million a year due to the oil tax changes. Russia says the subsidies cost it billions of dollars.

Moscow suspended negotiations in December, saying compensation depends on the degree of integration between Russia and Belarus.

Last week, Belarus President Alexander Lukashenko threatened to route the country’s trade in oil and oil products exclusively through the Baltic states, and said Minsk’s relations with Russia could break down over the subsidy row.