In poke at Russia, Belarus mulls routing oil trade via Baltics

MINSK, Jan 10 (Reuters) - Belarus President Alexander Lukashenko on Thursday threatened to route the country’s trade in oil and oil products exclusively through the Baltic states, and said Minsk’s relations with Russia could break down over a festering subsidy row.

Russia has kept neighbour Belarus in its geopolitical orbit through energy subsidies and loans, but plans to phase these out to lessen the burden on its economy, squeezed by Western sanctions since the 2014 annexation of Crimea.

Lukashenko also sought to dispel speculation in the Russian and Belarusian media that Russia wants to use the subsidy row to strong-arm Minsk into agreeing to integrate Belarus into Russia.

Belarus says it stands to lose $300-$400 million year from changes to Russian tax policy and has tried to negotiate compensation. Russia says the subsidies cost its exchequer billions of dollars.

Moscow suspended negotiations in December, saying compensation depends on the degree of integration between Russia and Belarus.

“If the leadership of Russia chooses such a path and the loss of its only ally in the western direction, it’s their choice,” Lukashenko was quoted by the state news agency BelTA as saying.

At the end of last year, Lukashenko met twice with his Russian counterpart Vladimir Putin, agreeing to set up a working group to settle their differences.

Belarus has long benefited from buying crude oil and some oil products cheaply from Russia and re-exporting them, helping Lukashenko stay in power for a quarter of a century while running the economy largely along Soviet lines.

On Thursday, he proposed the option of purchasing oil jointly with Baltic countries, refining it at the Novopolotsk refinery in Belarus and exporting the products.

It would not be the first time. In 2010, another dispute with Russia prompted Belarus to buy oil from Venezuela via ports in Ukraine.

Lukashenko said he had not discussed the prospect of merging Belarus and Russia with Putin.

“For many, many reasons, you yourself understand, there is no question of uniting the two states,” he said. (Editing by Matthias Williams and Catherine Evans)