Macroeconomic Update: How big is the Russian energy subsidy to Belarus, №2(17), March 2018
It’s commonplace: Belarusian economic performance depends on oil trade with Russia. But how big is its impact? On the one hand, in Jan-Feb 2018, the increase of output in oil processing ensured about 1 percentage point of GDP growth out of its total increase by 5.6% yoy. On the other, capacity of Belarusian oil refineries is limited, and such a direct impact cannot last long. On the one hand, Russia sells oil and gas to Belarus at below-market prices, and this create competitive advantage for Belarusian companies. On the other hand, this makes energy prices a tool of political pressure: political tensions between the two countries can unmake competitive advantage of cheap energy in a twinkle. Cyclical nature of these tensions create uncertainty and makes oil impact on the Belarusian economy even more ambiguous. This update considers Russian energy subsidy as one of the most important channels of the oil impact on the Belarusian economy.
Update is prepared under the support of the British Embassy in Minsk.