Belarus has been offered compensation from Moscow to offset reduced income from handling Russian oil, the country’s president said on Friday, in a step that could ease months of tension between the two neighbours.

Russia has long propped up Belarus’s finances with supplies of cheap crude that Minsk then re-exports at market prices. But a 2018 change to Russia’s excise tax regime has steadily reduced the country’s discount, eroding revenues and souring relations.

“Belarus has already calculated the losses in financial terms: approximately $420m to $430m in losses from the tax manoeuvre around the supply of 24m tonnes of oil,” Belarusian president Alexander Lukashenko said on Friday following a call with Russian president Vladimir Putin.

“[Mr] Putin has suggested that this money be compensated.”

The 65-year-old Mr Lukashenko, dubbed Europe’s last dictator in light of his 26-year-long rule, has spoken warmly of Belarus’s ties with the EU and the US in recent months while criticising Russia and Mr Putin, a tactic he has employed before when seeking to leverage benefits from Moscow.

Analysts said the comments were designed to remind the Kremlin that Minsk had other alternatives to remaining a quasi-client state of Moscow.

The discount on Russian oil has in the past effectively provided a subsidy to Minsk worth about 3 per cent of gross domestic product, and ensured the country remains dependent on Moscow.

Belarus last month started importing gas from Norway as an alternative to Russian supplies. Earlier this month Mike Pompeo became the first US secretary of state to visit the former Soviet state in a quarter of a century, and said that the US could meet all of Belarus’s oil needs.

The Kremlin on Friday did not confirm whether an exact figure had been discussed on the call, but said talks were ongoing to find a solution to the issue.

“Various options are being considered for finding mutually acceptable options,” said Mr Putin’s spokesman Dmitry Peskov. “Each side makes its own proposals . . . a number of parameters have yet to be determined, so the work continues.”

Russian oil companies have suggested reducing the premiums charged on their exports to the Belarusian government, Russia’s energy minister Alexander Novak told reporters on Friday.

The impact of the tax change on Belarus’s finances has become increasingly political over the past year as Russia has pushed for deeper integration between the two countries.

Moscow has proposed unifying the two countries’ tax, customs and banking systems in order to implement a 1999 agreement that sketches out the terms of a joint Union State. Other agreements already provide for free movement of people and goods, with certain restrictions.

Mr Lukashenko has been inconsistent in his statements on deeper integration, but in recent months he has opposed a form of unification that would make Belarus a junior partner to Russia.

Joerg Forbrig, of the German Marshall Fund of the US, said that the apparent compromise was unlikely to prove a long-term solution. But he said it represented a recognition by both sides that further escalation was not in either of their interests.

“In Belarus there are presidential elections this year, and while these will not be free or fair, it is still a moment where Lukashenko needs to be able to concentrate on domestic issues, and he won’t be able to do this so well if there is constant Russian pressure,” he said.

“On the other hand, Russia too has an interest in de-escalation because I don’t think at the moment they have an alternative to Lukashenko, and are not at the stage where they can manage a post-Lukashenko Belarus.”

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