Alexander Lukashenko is threatening Europe, but is there anything to fear?

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In the past few weeks Alexander Lukashenko has threatened a number of times to stop the transit of energy sources transported from Russia to Europe via Belarus. To what degree are Lukashenko’s threats real, and to what is he trying to ignite tension on the European energy market? – asks Mariusz Marszałkowski, editor at BiznesAlert.pl.

The more difficult the situation Lukashenka finds himself in gets, the harsher his rhetoric becomes. We have already heard about the threats to bring armed Kurds in the Donbass and about the stream of people coming from Afghanistan. Recently, energy issues have joined the party. The first time this happened was on the eve of the Polish Independence Day. „We are heating Europe, and they still threaten us that they will close the border. What if we cut off the gas? So, I would advise the leadership of Poland, Lithuanians and other madmen to think first before they say something,” he threatened. The second time he’s done it, was during a television interview given to a Kremlin propagandist Dmitry Kiselyov who asked him whether his threats to close the transfer of energy resources were serious. „If the Poles, or some others are trying to strangle me, do you think I will look at some contracts? If the Poles want to close their borders, let them close. We do not have many interests in the EU. We focus on trade with Russia, China and the rest of the Far East. But now what about the goods going west through our territory?,” Lukashenka replied in his own style.

When listening to Lukashenko’s threats, one should always look at their broader context and purpose. Apart from paying attention to what Lukashenko is saying, it is also pertinent to monitor the reaction of the main interested party – Moscow.

Two important pipelines for Russians that carry fuels run cross Belarus. The first one is the Druzhba oil pipeline, which transports oil to Poland and Germany, as well as the southern branch to Ukraine, the Czech Republic, Hungary. The second major route is the Yamal-Europe pipeline, which supplies Poland and Germany with gas from Russia.

What does Lukashenko want to shut down?

The most important question from the perspective of Belarusians is: what exactly does Lukashenko want to close? The matter is complicated, because both financial and ownership factors are at play here. The Belarusian section of the oil pipeline is managed by the state-owned company Gomel Transnieft Drużba. This company fully belongs to the treasury of the state of Belarus. So, in this case, it is possible to theoretically stop oil transmission to the West, either openly and intentionally, or under a guise, or a pretext, such as, e.g. a renovation. But would Lukashenko really decide to shut down the oil transit? This is unlikely for several reasons.

The revenue from oil transit through Belarus is not substantial. Belarus earns about USD 250 million a year from transit fees. However, stopping transit to the West could affect the supply of oil to Belarusian refineries. These, in turn, add more than three billion dollars a year to the Belarusian budget. Theoretically, Russia is able to divert oil supplies through Belarus via, for example, the BTS pipeline, and further to the ports of Ust Luga or Primorsk on the Baltic coast, or Novorossiysk on the Black Sea coast.

Russia’s opposition to such a move may be the deciding factor, as 30 percent of its budget dependents on revenues from the sale of hydrocarbons, and about 80 percent of this figure comes from the sale of oil. The Russians or Soviets, even in times of the most intense disputes with the West, never blocked oil exports. For Moscow, this raw material is too important and precious to give up making money on it. Although Russia’s ability to diversify black gold sales outside of the Belarusian route have increased significantly in the last two decades, it still remains very important for Russian companies. The absence of Russian raw materials going through the territory of Belarus would not be a serious blow to the states that would become the object of such an „attack”. Just as the Russians have expanded their offshore oil export capacity, so has Poland, as it has consistently invested and continues to invest in the ability to import oil through the Gdańsk terminal, as well as the continuous expansion of storage capacity for crude oil and finished petroleum products. This system was tested in 2019, when for more than 40 days no oil came to Poland through the Druzhba oil pipeline. Most oil supplies to Poland (but also to two German refineries) was carried out using the Naftoport in Gdańsk. This situation has also probably made it clear that an oil disruption, even a prolonged one, will not bring anyone in this part of Europe to their knees.

The situation is more complicated in the case of natural gas. The gas transmission system in Belarus, both the transit system, i.e. the Yamal-Europe (aka Yamal) gas pipeline, as well as the internal GTS of Belarus are 100% owned by the Russian Gazprom. Formally, Belarusians cannot shut down the transit of Russian gas to the West. However, considering the current situation on the European gas market, any risk of supply disruption, even an unlikely one, generates tensions and increases pressure on the gas price. Therefore, it is worth considering at this point in whose interests are Lukashenko’s threats.

For many years Russia has argued for the need to build gas pipelines bypassing the countries of Central and Eastern Europe. It has also been portraying Ukraine as a corrupt state where a civil war is raging. For years, Poland has been recognized by Moscow as Europe’s main russophobe. Now, the unpredictable Lukashenko has become another argument, as he may want to stop Russian gas transit to the West. This is particularly pronounced now, in the face of gas shortages. In this way, Russia may want to „motivate” Europe to quickly start gas transmission through Nord Stream 2. This tension also has a positive effect on the state of the budget of Russian Gazprom, which thanks to high gas prices is repairing its budget after a disastrous 2020. Gas, unlike oil, is much more suitable for use as a political weapon. Unlike oil, it is difficult to store, requires specific and expensive infrastructure, and the process of pumping it into storage facilities usually takes a lot of time. Any longer interruptions in gas supply would have a dramatic impact on companies, e.g. fertiliser and metallurgical firms, which require large and constant gas supply for their production processes.

Closing the Yamal would hit supply to Poland, so the gas would have to arrive via a different route. It is with the help of the Yamal and Belarus’s GST that we import almost 60 percent of the gas that we consume annually. This pipeline in recent months has been used only at about 30 percent. Over the past few weeks, gas deliveries to Germany have not been carried out through it at all, but without any negative consequences for Poland, which received gas in accordance with the contract. However, the shut down of Yamal would fulfil the threats, could up the gas prices due to a psychological effect, as it had happened in the past, but at the same time it would not create real problems for gas transit from Russia, as it has alternative routes available.

Lukashenko will close the valves at Putin’s sign

Oil supplies through Belarus are rather safe. At the same time, there is no danger in the event of a break, even a relatively long one. In addition, Russia will not agree to stop oil exports, as they significantly contribute to its budget. The case may be different for gas. This is because it accounts for a significantly smaller share of budget revenues, as well as because Russia has alternatives to supplies via the Belarus route (e.g. Nord Stream), the cessation of gas supplies through the Yamal would have a symbolic and psychological dimension, which would mainly affect opinions in western Europe. At the same time, Moscow would gain further arguments for its policy of „diversifying” its gas exports, while taking a jab at Poland without exposing Gazprom to possible damages and penalties. If, indeed, the valves in Belarus are closed, then we can be sure that Putin gave the signal, and Lukashenka carried out the order.