The American-Iranian conflict is nearing its end, and oil prices have almost reached pre-war levels. We asked an expert what this will mean for Belarus.
Oil terminal "Sheshkharis" in Novorossiysk, 2015. Photo: Sergei Guneyev, Sputnik, Kremlin Pool Photo via AP, File
Return to pre-war levels
Before the start of the US-Iran conflict, Urals crude oil was sold at $56-58 per barrel. Now its price has approached $59. This is despite the fact that for several months its price often exceeded $100, and at peak moments reached almost $120 per barrel.
High prices, along with the freeze on sanctions against Russian oil, gave Russia the opportunity to receive additional export revenue.
The end of this favorable period for the Russian economy, along with regular attacks on oil refineries, could negatively impact the economy and the ruble's exchange rate. And since the Belarusian economy is closely linked to the Russian one, all negative consequences will also affect our economy.
BEROC expert Anastasia Luzgina notes that the decline in the Russian ruble's exchange rate in the second half of the year was predictable.
"This was partly due to the fact that abnormally high oil prices were bound to decrease over time, as OPEC countries increased oil supply volumes, and also because Iranian oil will enter the market.
This is also related to problems at Russian oil refineries, where the volume of petroleum product supplies may decrease as a result of destruction," explains the economist.
Illustrative photo. Photo: Nasha Niva
Will oil sanctions return?
Furthermore, given the normalization of the situation in the Middle East, the US is unlikely to extend the freeze on sanctions against Russian oil.
"Therefore, this could increase the discount at which Russia will be forced to sell its oil, which will again be subject to sanctions.
For Russia, this will mean a trend of the Russian ruble declining against foreign currencies, and accordingly, similar trends will most likely occur with the Belarusian ruble," the expert believes.
Illustrative photo. Photo: Nasha Niva
At the same time, the economist notes that this will not be an instantaneous but a time-stretched process, as contracts are concluded in advance and revenues from new, still high prices also begin to arrive with a certain delay.
"Therefore, the Russian economy will fully begin to feel the effect of cheap oil closer to August — early September," Luzgina points out.
Will the exchange rate be maintained?
For Russia, the decline in the ruble's exchange rate can also be viewed as a positive effect, as the ruble is currently too expensive, which is not very good for their economy either.
"If an objective decline in the exchange rate occurs in Russia, then the economic authorities will do nothing to maintain the rate at its current level.
But this will act similarly on the Belarusian foreign exchange market, leading to a depreciation of the Belarusian ruble against the dollar. At the same time, it may strengthen against the Russian ruble," explains the economist.
However, the decline in oil and gas revenues in Russia is not just about changes in the foreign exchange market.
"For an economy that is already not in the best condition, all of this, of course, will have negative consequences.
In the Russian Federation, economic growth forecasts have already been revised downwards, reducing the projected figure to 0.4%. A slowdown in economic growth means that demand for Belarusian goods will also not increase."
Illustrative photo. Photo: Nasha Niva
And since the economy of Belarus is closely linked to Russia's, all negative trends occurring there will be reflected in the economy of Belarus.
Belarusian oil refineries will not save the situation
At the same time, it is important to understand that the revenues Belarus receives from increasing fuel supplies to Russia are, overall, a small positive for the economy.
"Over five months, 270 thousand tons of gasoline were supplied to the Russian market. This is a multi-fold increase in supplies compared to last year. However, even assuming that only 60 thousand tons will be supplied in June, this is still less than 2% of the Russian market's monthly needs.
Most likely, Russia could buy more, but Belarusian oil refineries physically cannot significantly increase gasoline production," the expert states.
Luzgina also speaks about less obvious, but also quite significant factors that could negatively affect Belarusian exports.
"Drone attacks on Russian infrastructure potentially limit the volume of Belarusian goods exports that transit through Russia to other countries. Therefore, increasing fuel supplies to the Russian Federation may not compensate for the additional costs incurred due to the deterioration of logistics routes."
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