Belarusian schemes affect domestic refineries and Ukrainian budget

Private Belarusian companies sell components for illegal petrol production in Ukraine under the guise of solvents. Belarusian refineries and the Ukrainian budget lose from this, says the head of the Ukrainian consulting group "A-95" Serhiy Kuyun.

Euroradio found out what's wrong with deliveries to Ukraine and why Belarusian companies are interested in such "schemes."

"These are not solvents at all"

In 2021, Belarus almost tripled its supplies of "dissolvents and diluents" to Ukraine. While in 2020, Belarus sold 22.3 thousand tons, in 2021, the volume reached 57.6 thousand tons. Only Russia sold more "dissolvents" to the Ukrainian market than Belarus -- 66.8 thousand tons.

Dissolvents for the paint industry are not subject to excise tax in Ukraine. In Serhiy Kuyun's opinion, this has been used for "schemes."

"We have to understand that these are not solvents at all. If we look at the passports of "dissolvents" from Belarus, we see a mixture of octane-enhancing additives. Butyl ether, methanol, acetone, isopropyl alcohol. There are a lot of components, which individually are subject to high excise tax.

But a mixture of such components is imported to Ukraine without excise tax and can be used to produce gasoline.

"In essence, excise-free gasoline is being delivered. Because subsequently, 90% or even 100% of these diluents from Belarus go to gas production in an artisanal way.

There are more and more exporters of dissolvents

According to the expert, Belarusian private companies, including Russian ones, buy the necessary components for blends at refineries. Since 2018, when exports of dissolvents to Ukraine began to grow, Belarus began to buy more of them in Russia.

The blends are then sold with a surcharge to Ukraine.

"The markup is small. The Belarusians earn $15-20 per ton. Of course, the main profit is made by the Ukrainian counterparties. Our excise duty is 245 euros per 1,000 liters, more than 300 euros per ton. Plus VAT. It is almost 400 dollars per ton. This is huge money by the standards of this industry. The Belarusian oil company sells fuel at auction. People there argue up to their mouths about one or two dollars per ton".

Although Belarusian companies get less than Ukrainian companies, more people want to participate in such supplies. According to the data of A-95, at the beginning of 2021, there were two Belarusian suppliers of dissolvents to the Ukrainian market. Now there are four of them.

Euroradio earlier reported that the founder of one of the suppliers, Estika-Invest, was mentioned in the Panama Papers.

Belarusian oil refineries lose money

Supplies of "solvents" hit Belarusian oil refineries as artisanal production replaces their oil products. 

"If it weren't so, they would buy more gasoline from the Belarusians. Some Belarusians are putting sticks in the wheels of others, like the Mazyr refinery. Although, we also receive a lot of gasoline from Naftan," says Serhiy Kuyun. "The refineries should be interested in stopping this practice. Gasoline is a sore subject for them because it is always in surplus. It would be a good help for the Belarusians. Apparently, they can't get their hands on it, or someone patronizes the production of solvents".

Belarusian companies may soon have to stop the trade, which strikes at the budget of the neighboring country. The Ukrainian deputies registered in the Verkhovna Rada a draft law "On amendments to the Tax Code of Ukraine and other laws of Ukraine on strengthening the fight against the shadow turnover of fuel." If it is adopted, then the excise tax will have to be paid if products like solvents have at least one taxable component in its pure form.

According to estimates by one of the deputies who participated in drafting the bill, the Ukrainian budget annually loses about 1.6 billion hryvnias (about $57.2 million) because of solvents.