Energy Sector: Nuclear ambition fueled by Russian credit

Polina Alekseeva

Summary

In 2026, nuclear power generation failed to substantially cut Belarus’s reliance on Russian natural gas imports. Electricity consumption kept growing, and despite previous government assurances, tariffs also increased.

The international sanctions and loss of lucrative export markets in Europe and Ukraine turned the Belarusian oil refineries — once seen as a “golden goose” — into distressed assets. Neither the compensation granted to Belarus for the Russian tax maneuver in the oil sector nor logistics benefits for exporting oil products to “friendly countries” succeeded in maintaining the refineries’ former market positions.

The low price of imported Russian natural gas no longer provided Belarusian exporters with a competitive edge. Consequently, throughout 2025, the authorities continued negotiating a closer convergence of natural gas rates with those in Russia.

Trends

Electricity: third power unit at the BelNPP and luring cryptocurrency mining

In 2025, a major development in Belarus’s energy sector was the November decision to add a third unit to the Belarusian Nuclear Power Plant (BelNPP). The plant currently operates two VVER-1200 reactors, with a total capacity of up to 2,400 MWe. The first reactor was put into operation in June 2021, followed by the second one in November 2023.

The plan is to bring the third reactor online between 2035 and 2038, funded by the savings from the previously allocated USD 10 billion Russian loan for the BelNPP’s construction. The overall cost of the two operational units, including infrastructure, came to about USD 7 billion, with approximately USD 5.36 billion financed through the Russian loan, according to Rosatom State Atomic Energy Corporation.

In reality, the anticipated advantages of building the BelNPP proved less substantial than initially claimed. According to the Ministry of Energy, over the past five years, Belarus’s reliance on natural gas for power generation dropped from 95 % to 65 %, yet natural gas still remains the dominant energy source in the country’s energy mix.1 During the same period, the energy intensity of GDP decreased by 4 %, but it remains 130% higher than in Germany and 30 % higher than in Finland, the U. S., and global averages.

It had been projected that the BelNPP would produce approximately 18.5 billion kWh annually (with the 2024 output reaching 15.693 billion kWh), enough to cover 40 % of domestic electricity demand and replace about 4.5 to 5.0 billion cubic meters of natural gas each year. However, evidence suggests that nuclear generation has not led to a significant decrease in natural gas imports. The Ministry of Energy’s statistics indicate that in 2025, Belarus continued to import roughly the same volume of Russian natural gas as throughout 2023–2024: around 17 billion cubic meters — compared to the 18–19 billion cubic meters bought from Russia annually before the nuclear plant was launched.

Officials had maintained that, following the commissioning of the BelNPP, the currency burden on the budget due to natural gas substitution would decrease by over USD 500 million per year. However, they did not mention any payments related to the nuclear loan. Russia repeatedly postponed Belarus’s loan repayment deadlines and revised its terms. In July 2020, the start of principal repayment was pushed back to April 1, 2023, and in March 2023, it was further put off until April 2024. The loan will now be repaid in Russian rubles rather than U. S. dollars. Moreover, the interest rate became fixed and reduced to 3.3 %. The loan is scheduled to be repaid over a period of 15 years.

Officially, it was anticipated that after the BelNPP became operational, electricity tariffs for end users would decline by 20–30 %. However, the opposite trend took place: on January 1, 2025, tariffs for some organizations increased by 11.9 %, and for households by 12.0 %. In 2026, tariffs rose an additional 7 %.2

In 2024, Belarus’s electricity consumption grew by 5 % compared to 2023, reaching 43.2 billion kWh. The Ministry of Energy had estimated that consumption would be approximately 44 billion kWh in 2025. However, according to GPO ‘Belenergo’, which oversees the country’s power sector, Belarus’s electricity generation in 2025 decreased by 0.31 % year-on-year to 43.07 billion kWh.3 The Ministry of Energy attributed the growth in electricity usage during 2023–2024 to the completion of large industrial projects, rising household demand, development of electric transportation, and cryptocurrency mining.

Between 2021 and 2025, over 2 million square meters of electric-powered homes — residences where electricity is the sole energy source for heating, hot water supply, and cooking — were constructed in Belarus. Private homeowners were also increasingly adopting electric heating; in the past five years, 171,000 applications were received to switch to electric heating, with a satisfaction rate of 91.4 %. The upward trend is largely fueled by reduced electricity tariffs for this group of consumers.

Electric mobility is rapidly expanding in Belarus, driven by favorable energy pricing. In 2025, the number of electric vehicles doubled compared to 2024, reaching a total of 49,557 units. According to GPO ‘Belenergo’, electric vehicle charging stations use between 60 million and 80 million kWh of electricity annually, whereas the Ministry of Energy estimates the total consumption at around 200 million kWh per year. This higher figure accounts for the fact that many electric vehicles are charged at home rather than through public charging stations.

Regarding cryptocurrency mining, Minsk, motivated by ambitions tied to its new nuclear power plant, was among the first countries in Eastern Europe to legalize cryptocurrencies and mining activities. In December 2017, Alexander Lukashenko signed the Decree on the Development of the Digital Economy, which legalized cryptocurrency transactions and offered benefits to miners — including income tax and VAT exemptions until 2023 with the possibility of extensions, as well as permitted the free circulation of digital assets. Belarus is the third most affordable country in Europe for electricity. The commissioning of the BelNPP introduced additional power generation capacity, attracting several foreign companies.

These included Chinese manufacturers of cryptocurrency mining equipment, led by the industry giant Bitmain, along with Russian operators, one of them being Mining Express, which built a 20 MWe mining farm. Major players deployed their equipment in the High Technologies Park (HTP), where they benefited from tax incentives and received legal support. It is also known that Whitebird, a Belarusian Minsk-based crypto platform and HTP resident, plans to launch the country’s first crypto bank.

According to preliminary estimates, in 2025, electricity used for mining in Belarus reached around 1.3 billion kWh, which is twice the amount recorded in 2023.4

Apparently, with Europe’s demand for Russian natural gas declining, Moscow is unlikely to be pleased with Minsk’s plans to expand nuclear power, especially since Belarus remains one of the largest importers of Russian natural gas. Nevertheless, Lukashenko tried to assure Putin that the launch of the BelNPP wouldn’t impact the volume of gas imports. He argued that several Belarusian thermal power plants, which used to run on natural gas, were now in cold reserve and used for mining.

Oil: refineries as a distressed asset

In 2025, Belarusian refineries faced nine months of financial losses, driven by sanctions, the loss of the Ukrainian market, and challenging global oil market dynamics. ‘Naftan’ and ‘Mozyr NPZ’ mainly concentrated on supplying the domestic market. Exporting fuel to Russia proved unprofitable because of the contrasting operational conditions with Russian refineries.

According to state-owned ‘Belorusneft’ oil company, petroleum product consumption in the country amounted to 4.225 million tons in 2025, an increase from 4.055 million tons in 2024, 3.865 million tons in 2023, 3.895 million tons in 2022, and 4.089 million tons in 2021.5 ‘Belorusneft’ projects that the market capacity for petroleum products will reach 4.288 million tons in 2026.

On January 1, 2024, Russia concluded its tax maneuver, leading both Russian and Belarusian refineries to start purchasing crude oil at international market prices. The 2022 agreement with Russia on general taxation principles helped Belarus address the longstanding challenge of compensating for losses resulting from the Russian tax maneuver. However, to maximize the amount of compensation payable from the Russian budget, Belarusian refineries need to process at least 18 million tons of crude annually — equivalent to 9 million tons per refinery. Attaining these processing levels depends on access to profitable export markets, which Belarus currently lacks.

It was announced that Moscow would support the Belarusian refineries in making up for the loss of the European and Ukrainian markets: its compensation for the tax maneuver was supposed to allow Belarus to sell 1.8 million tons of motor fuel to Russia annually. However, in practice, supplies remained at a minimal level.

Since May 2021, official export figures for Belarusian petroleum products have been unavailable after Belstat National Statistical Committee ceased publishing this data. In autumn 2023, the Russian government halved payments under the so-called fuel damper mechanism — a state system designed to stabilize domestic gasoline and diesel prices — due to prevailing oil price conditions. The decision also impacted Belarus. In September 2023, the Belarusian refineries halted their supply of automotive fuel to Russia as a result of reduced budget allocations under the fuel damper mechanism.

Over the following two years, the situation remained largely unchanged. Market conditions did not create sufficient incentives for Belarus to supply its petroleum products to Russia. Throughout most of 2025, Brent crude oil blend — to which the cost of Russia’s flagship Urals crude is informally linked — traded within a USD 60–70 per barrel range. During 2024 and 2025, the spread between Brent and Urals averaged about USD 12–13, rising to USD 27 per barrel in mid-February.

In spring 2025, Lukashenko acknowledged that Belarusian refineries remained unprofitable due to expenses related to modernization, sanctions, high export logistics costs, and rising oil prices. This was despite the 2025 budget law projecting receipts of BYN 4.373 billion (USD 1.49 billion) from the Russian budget as compensation for the tax maneuver.

On March 14, 2025, in his address to the Federation Council, Lukashenko assured Russian officials that the Belarusian refineries were capable of processing several tens of millions of tons of crude oil. However, he indicated that this was unfeasible due to unequal conditions compared to Russia. He urged for measures to secure at least a 7–8 % profitability rate for the refineries. In October 2025, Belarusian Prime Minister Alexander Turchin discussed the same concern.

Following this, Russia passed legislation permitting companies that process Russian oil under tolling arrangements to receive a reverse excise duty, similar to the scheme applied to refineries within Russia. Consequently, in October 2025, Belarus’s gasoline exports to Russia surged 32-fold compared to 2024, reaching 24,700 tons.6 Beginning in the fourth quarter of 2025, Belarusian refineries started processing Russian crude oil under tolling terms, which, according to the Belarusian government, could guarantee a profitability of 7–8 % and support sustainable, profitable operations.

In November 2025, gasoline shipments to the Russian Federation nearly doubled compared to October, reaching 96,000 tons. However, also in November, amid falling domestic demand in Russia, diesel fuel exports declined by one-third from October, amounting to 21,200 tons. Notably, Belarus exported petroleum products to Russian companies that provided crude oil for processing at the Belarusian refineries.

Regarding the export of Belarusian petroleum products to third countries, the outcomes fell short of high expectations. In 2025, these exports were mainly directed to Central Asia and Afghanistan, rather than Russia. The shipments to this region increased 4.9 times compared to 2024, reaching 946,600 tons.7 Meanwhile, transit shipments of gasoline from the Belarusian refineries passing through Russian seaports during the first 11 months of 2025 decreased by 29 % compared to the same period in 2024, totaling 1.36 million tons.8

It is worth highlighting that Belarus and Russia originally planned to establish a unified oil market by 2025, but the deadline was subsequently pushed back to January 1, 2027. Despite this, many officials remain doubtful about the effectiveness of this initiative as a viable solution for Belarusian refineries.

The country’s oil concern Belneftekhim acknowledged that Belarus’s oil refining sector can no longer rely solely on crude oil processing for growth. Consequently, a strategic shift was announced to transition away from the traditional refinery model focused mainly on motor fuel production toward petrochemical industries. Plans at ‘Naftan’ include establishing facilities for polycarbonate and ABS plastic production, while Mozyr Oil Refinery aims to advance polypropylene manufacturing. Moreover, by 2030, Belneftekhim intends to move beyond mere modernization and achieve technological leadership across several segments, with a target of launching forty new products.

It is evident that, with a profitability of 7–8%, the Belarusian refineries will find it difficult to fund these expensive projects without government support. In 2026, the Belarusian budget plans to receive BYN 6.672 billion (approximately USD 2.27 billion) from Russia as compensation for the tax maneuver. These funds are expected to be directed to the refineries, assuming no disruptions occur in tolling crude oil processing.

Oil transit: only Kazakhstan remains

Prior to the sanctions, Belarus was the primary transit route for Russian crude oil to Europe, with approximately 50 million tons of Russian oil passing through the ‘Druzhba’ pipeline annually. Starting January 1, 2023, Germany ceased importing crude from Russia. Subsequently, the European Union imposed an embargo on Russian oil deliveries via the northern branch of the ‘Druzhba’ pipeline (through Belarus). Meanwhile, oil supplied via the southern branch through Ukraine was purchased by Hungary and Slovakia.

At present, Belarus solely ensures the transit of Kazakhstani oil. In 2024, oil shipments from Kazakhstan to Germany amounted to 1.5 million tons, rising to 2.1 million tons in 2025. Projections indicate an expected increase to 2.5 million tons in 2026. Notably, in January 2026, Kazakhstan boosted its oil exports to Germany via the ‘Druzhba’ pipeline through Belarus by 144 % compared to January 2025.

Natural gas: stable prices and limited transit

In 2025, the natural gas price was fixed at USD 128.52 per 1,000 cubic meters for Belarus, payable in Russian rubles. This rate has remained unchanged since 2022 and is anticipated to stay the same in 2026. In the neighboring Smolensk Region of Russia, natural gas tariffs are USD 30–40 lower per 1,000 cubic meters. For comparison, the average natural gas price in Europe increased by 9.2 % in 2025 compared to 2024, reaching USD 422 per 1,000 cubic meters.9

The Belarusian authorities aim to expedite the creation of a unified natural gas market with Russia. They believe that, within a shared energy framework and as natural gas prices align with Russia’s domestic levels, electricity generation costs in Belarus will be significantly lower than in Russia due to the country’s more efficient power sector. This would position Belarus to export electricity to Russia and extend its reach further eastward.

It was originally planned to establish a unified gas market on January 1, 2022, but by 2026, this had yet to be realized. In December 2025, Dmitry Krutoi, head of Lukashenko’s administration, stated on Belarusian Television that this “key” issue would typically be resolved through discussions between the presidents of Belarus and Russia.

Belarus is unlikely to attain gas prices equal to those within Russia without substantial reforms to its fuel industry. Currently, Russia’s ‘Gazprom’ sells natural gas to the Belarusian intermediary GPO ‘Belteplogaz’, which then sells it to end consumers at a markup. However, ‘Gazprom’ would prefer to earn profits directly from sales within Belarus, a goal that would require the country to open its market to Russian gas suppliers. Most likely, the Belarusian authorities will avoid taking such a step, fearing it could compromise their control over domestic retail prices.

Gas transit: only to the Kaliningrad Region.

The Belarusian segment of the Yamal – Europe gas pipeline, which has been owned by Gazprom since late 2011, has a planned capacity of 32.9 billion cubic meters of natural gas per year. Historically, this pipeline supplied gas to Lithuania, Ukraine, Poland, Germany, and the Kaliningrad Region. Russia annually paid approximately USD 250 million for the transit of its natural gas through Belarus.

In April 2022, Lithuania completely stopped importing Russian gas, allowing only transit to the Kaliningrad Region. According to Bruegel, pipeline exports, which totaled around 31 billion cubic meters in 2021, were halted in 2022. In May 2022, Russia imposed sanctions on over 30 foreign companies, including EuRoPol GAZ, the company that owns the Polish section of the Yamal – Europe pipeline. Since then, Gazprom has been prohibited from exporting gas through Poland.

Natural gas transit from Russia to the Kaliningrad Region via Belarus and Lithuania continues through the Minsk – Vilnius – Kaunas – Kaliningrad spur. In 2025, the volume of gas transit increased by 9 % compared to 2024, reaching 2.5 billion cubic meters. Under the new agreement signed on December 30, 2025 with Lithuania’s gas transmission operator Amber Grid, Gazprom is committed to delivering 10.5 million cubic meters of natural gas daily through Belarus to the Kaliningrad Region until 2030.

Conclusion

Following the signing of an agreement with Rosatom to build the third unit of the BelNPP, scheduled for finalization in 2026, Belarus is anticipated to become even more reliant on Russia for raw materials and financial support. This agreement is also expected to result in further delays for Belarus in meeting its repayment obligations on the Russian loan associated with the BelNPP project.

Despite Minsk’s longstanding aspirations, it remains unlikely that Belarus and Russia will establish a unified natural gas market in 2026. Nevertheless, Minsk continues to push for the early alignment of gas prices. Developing a common gas market is viewed as a vital step toward integrating the two countries’ electricity grids, potentially enabling Belarus to export electricity to Russia. Although Russia currently has an energy surplus, with an estimated excess capacity of approximately 20 GWe, some regions within Russia experienced energy shortages at the end of 2025 and the beginning of 2026.

In 2026, Belarus is expected to remain a supplier of petroleum products to Central Asian markets, as Russian Railways extended tariff discounts for the transit of Belarusian petroleum via the Caspian Sea port facilities. However, these prospects will largely depend on developments in Russia’s petroleum market, which experienced volatility in 2025 due to record-high stock prices and repairs necessitated by Ukrainian drone attacks. Consequently, Russia had imposed export restrictions on petroleum products, which had been lifted by 2026.

In January 2026, exports of Russian petroleum products to Central Asia and Afghanistan rose by 44 % compared to December 2025. The Belarusian refineries will need to factor in this trend when supplying petroleum products to the region.

Regarding the transit of Russian crude oil and natural gas through Belarus to Europe, it is unlikely to resume in the near future, even if Russia ends its war in Ukraine.