EU-Belarus trade: hands in the cookie jar

Latvia, a major importer of Belarusian oil products, has twice in the past blocked the adoption of EU sanctions, haggling for its right to help President Aleksander Lukashenko's nomenklatura to earn money through oil smuggling.

EU sanctions last spring omitted several Latvian-linked companies owned by Yury Chizh, an oligarch close to Lukashenko, such as Traiplenergo, Belneftegaz and Neonafta.

They also omitted Mamas D, a joint venture in Latvia which makes "biodiesel" by mixing Russian diesel with vegetable additives.

Meanwhile, official numbers tell a curious story.

According to Belarus' statistics office, sales to Latvia between January and July 2012 accounted for $3 billion worth, or 10 percent of all exports.

In 2011, Latvia gobbled up $3.2 billion of Belarus exports. But Latvian statistics say the sum was just $800 million.

It looks like the $800 million figure represents what actually stayed in Latvia. Really? Why would Latvia need so much solvent?

Meanwhile, Belarus said that the Netherlands last year absorbed $6 billion worth or 20.3 percent of its exports, almost all of it oil products.

The Netherlands says it was just $109 million, 60 times less.

Dutch MPs in parliamentary hearings said the country is not a major Belarus importer because most of the oil products are transited to other countries.

So why did Latvia fight so hard against new sanctions during the last round of EU talks in Spring?

Why are the Dutch so eager to look innocent instead of scrutinising the massive disparity in export figures?

Yury Chizh has old connections with Latvia. His Neonafta company, which owns Mamas D, is one of the largest Belarusian firms operating in the EU country. In 2009 he even co-chaired a Latvia Belarus Council on Economic Co-operation.

In recent years Latvian lobbyists have tried hard to ensure a significant part of Belarusian exports goes via Latvia's Ventspils port rather than Lithuania's port of Klaipeda or Estonia's port of Muuga.

Transit countries make big money from the trade.

The same is true of the Netherlands' port of Rotterdam, the largest in Europe. According to a recent European Parliament survey on the structure of the Belarusian economy, the Netherlands is the second largest importer from Belarus (after Russia).

Its top Belarus buyers are Trafigura and Vitol.

Both of the Dutch oil traders have bad reputations in any case. Trafigura is implicated in toxic dumping in Africa in 2006 and in Iraq sanctions evasions before that. Vitol was earlier this year exposed for evading EU oil sanctions on Iran.

Their re-sale of Belarusian oil products turns them a hefty profit and also brings cash to the Netherlands through taxes and port fees.

At the same time, the Dutch operations launder Belarusian oil.

After trans-shipment in Dutch ports, the dictator's crude becomes clean enough to be sold to the US, which has imposed sanctions on direct oil trade with Lukashenko's henchmen.

There is no incentive for any of these structures to consider the impact they are having on the welfare of Belarusian people.

In the first six months of this year alone, EU countries gave Lukashenko a gift of $8 billion worth of external trade.

It is this gift which perhaps did more than anything else to help him ride out the economic crisis in his country and to consolidate his power in September's elections while doing nothing to comply with EU demands to free political prisoners.

In the post-election environment, he still needs bags of foreign currency to cling on.

But Russia is tightening control of the oil trade, which sees Lukashenko buy subsidised Russian crude and then re-export it to the EU labelled as solvents to avoid paying Russian re-export fees.

He needs to make sure that EU sanctions do not spread to hurt his Dutch and Latvian export schemes.

So what does he do?

He frees two political prisoners and softens his rhetoric on the West in the same game of swing which he has played between Moscow and Brussels for years.

The EU has promised a lot in terms of putting pressure on Belarus. But promises are not the same thing as action.

EU diplomats know all too well how the game works.

The question is - are they happy to keep playing dumb, just like the Dutch MPs who say oil transit is not the same as oil imports?

We will find out in Brussels on 15 October.

The writer is a co-ordinator at the working group on investments at the Committee for International Control of the Human Rights Situation in Belarus