Russia has agreed to sell crude oil to Belarus cheaply, days after the two sides concluded a deal to resume Russia's oil flows to Europe through Belarussian pipelines.

Russia agrees on tax reduction

After some 10 hours of tense talks in Moscow, the two sides signed a three-year agreement on Friday, under which Russia will cut the duty on oil exports to Belarus to 53 U.S. dollars, down from the 180 dollars, and Belarus will share with Moscow a substantial amount of profits from the refined oil products it sells to Europe.

"In fact, we will for instance earn 53 dollars from every ton of crude shipped to Belarus in 2007," Russian Prime Minister Mikhail Fradkov was quoted as saying by Interfax after meeting with his Belarussian counterpart Sergei Sidorsky.

The tax cut was made after Belarus agreed that it would share with Russia a large proportion of the billions of dollars it has made from refining cheap Russian oil and selling the value-added products to European markets.

Russian news agencies cited Fradkov as saying that Russia would receive 70 percent of revenues from Belarus's exports of refined Russian oil this year and the figure would rise to 80 percent in 2008 and 85 percent in 2009.

Fradkov said that the deal would bring more than 1 billion dollars into the Russian budget.

For his part, Sidorsky was quoted by the Itar-Tass news agency as saying that "we have been carefully considering the rates for the past two days and studying the possibilities of Russian companies and crude supplies to our refineries. Naturally, the interest must be mutual."

Sidorsky, who started a two-day negotiation in Moscow from Thursday, said sugar deliveries was another sensitive issue to be discussed after the dispute over oil is resolved.

In late December, Russia introduced duties on sugar imports from Belarus, which normally sells half of its annual production of around 770,000 tons to Russia. Belarussian officials said sugar producers have already lost around two million dollars as a result of this tax.

Deal seems to cap dispute

The deal seemed to cap the weeks-long dispute between the two previously close allies over energy prices.

In the new year, Russia doubled gas export prices to Belarus and imposed a full export rate for crude oil -- which had previously been supplied without a duty -- of around 180 dollars per ton.

Belarus also reached a deal with the Russian gas giant Gazprom in the last minutes of 2006, agreeing to buy Russian gas at 100 dollars per 1,000 cubic meters in 2007, more than double the 46.7 dollars it paid last year. Gazprom agreed to pay more for its gas supplies to Europe through Belarus.

However, Belarus, a country of 10 million people, which depends heavily on cheap energy to turn a profit, refused to accept Moscow's imposition of a 180-dollar-per-ton export duty on all Russian oil shipped to the country.

Earlier this month, Minsk responded by slapping the oil transit duty of 45 dollars on Russian oil piped across its territory, effective from Jan. 1.

On Monday, Russia, the world's second biggest oil exporter, cutoff the flow, claiming that Belarus had siphoned off some 80,000 tons of oil as payment for the transit fee. The 60-hour shutdown affected Germany, Poland and a host of other countries, cutting European Union (EU) oil supplies by around 1.5 million barrels of oil per day.

On Wednesday, after a telephone conversation between Belarussian President Alexander Lukashenko and his Russian counterpart Vladimir Putin, Belarus lifted the transit tax and agreed to return the oil Moscow said it had taken illegally. Hourslater, the oil flow was back on track.

(Xinhua News Agency January 13, 2007)