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GAS 23 June, 2020 10:00 am   

A Poland-Belarus gas pipeline? Lukashenko may jeopardize everything again

Lukashenko’s repressions against the opposition may blow up his own plan to become independent of hydrocarbons from Russia. This is happening at a moment when the most ambitious plans are entering the stage, including the construction of a Poland-Belarus gas pipeline – writes Wojciech Jakóbik, editor-in-chief at BiznesAlert.pl.

Dreams of diversification closer to becoming reality

“Thank God, there is enough oil in the world and prices are rational,” Alexander Lukashenko, president of Belarus, said. “It’s similar with gas, there is enough of it. The biggest suppliers of this raw material are currently fighting for their market share. So there is an alternative that could be used,” he added.

Gazprom and Minsk are currently in the midst of a dispute over payments for gas that was already supplied to Belarus. Russians want Belarusians to return the debt, but Belarusians do not believe they have one. Minsk also wants Gazprom to lower its gas price, which is currently at $ 127 per 1 cubic meter. The Russian media have suggested that gas deliveries to Belarus could be stopped at the beginning of July if the dispute is not resolved. However, it has recently escalated even further after the detainment of the staff of Belgazprombank, whose CEO used to be Viktor Babaryka who is now Lukashenko’s challenger in the upcoming presidential elections. Gazprom declared these actions were illegal.

The transmission gas pipelines in Belarus are owned by Gazprom Transgaz Belarus because in 2011 Lukashenko sold them in exchange for another discount for gas from Russia. Assuming Minsk does not want to use force to take over the operator of the domestic gas grid, Lukashenko could use another solution, which is less controversial and is being considered in theory. The solution is to build a new gas pipeline that would be out of Russia’s control and could be operated by a separate operator owned by Minsk, that gas pipeline would run from Poland to Belarus.

An analogous solution is a gas pipeline between Poland and Ukraine. One of the arguments for constructing a new inter-system connection between Poland and Ukraine was the need to establish infrastructure independent of bilateral agreements with Russia, which in the past made it impossible to use the existing gas pipelines for reverse-flow supply. Agreements between operators and Gazprom made it difficult to transmit gas in two directions, which is why when in 2015 Ukraine started importing gas from the EU, for the first couple of years, the availability of reverse flows with Kiev was limited. These restrictions were removed, so one of the arguments for the new gas pipeline was no longer valid.

A gas pipeline between Poland and Belarus could be justified from this point of view, but it would face similar challenges. The European Union will not co-finance projects with third countries from funds that support diversification within Europe, like in case of the LNG terminal or Baltic Pipe. The gas pipeline between Poland and Belarus, similarly to its Ukrainian counterpart, would have to face problems with financing. The pipe’s profitability would have to be based on a long-term supply contract and Minsk’s volatile position undermines the certainty that it would sign such a deal in the end.

Just like with the gas pipeline to Ukraine, the solution could be offered by the United States that could provide financial support. The US has already engaged in gas diversification to Belarus. Americans signed a memorandum on regional cooperation in the energy sector with Poland and Ukraine, which provides for the possibility of financing energy projects. No specific steps followed this declaration, but in theory Americans could co-finance the interconnections on the border between Ukraine and Belarus, which would give them better access to those gas markets, which would be able to buy gas from various directions, including in liquefied form from American gas terminals via Poland. On paper this complicated jigsaw is possible to piece together. However, everything depends on Belarus’s credibility.

Lukashenko may jeopardize everything again

The news about the arrest of Alexander Lukashenko’s potential rival for the presidency was confirmed. He was detained on 18 of June when leaders of states of the Eastern Partnership talked online about the future of the initiative. The growing tensions may jeopardize Belarus’s plan to break free from dependence on Russia’s hydrocarbons.

The leaders of the European Union and of the Eastern Partnership countries: Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine discussed how the initiative should respond to the coronavirus epidemic and how to continue their strategic cooperation despite the new challenges. “Leaders expressed the political will to continue building an area of shared democracy, prosperity and stability, anchored in our shared values, through a rules-based international order and international law,” Charles Michel, President of the European Council, informed in a press release.
On the same day Viktor Babaryka was arrested in Belarus. He was accused of tax fraud and is facing 15 years of jail time. The former CEO of Belgazprombank wanted to run in the upcoming presidential elections. Minsk replaced the top management at the bank after he had left and announced a number of crimes had been committed at the bank and then blamed Babaryka. Gazprom and Russia stood in his defence. Belarusians also arrested members of the opposition and the media. So far none of the protesting civilians were arrested, but the demonstrations are growing in numbers because according to reliable polls, Lukashenko’s support is at 3 percent.

Nobody knows how the growing unrest in Belarus will impact its plan to break free from the dependence on hydrocarbons from Russia. So far neither Brussels nor Washington imposed any sanctions on the regime in Minsk. However, such risk may impact the talks on diversification, e.g. of oil or gas supply via Poland’s territory.

The political tensions in Belarus before the presidential elections in August may undermine talks on energy cooperation in the oil and gas sector. In such a case, Minsk’s totalitarian actions will once again cause its isolation, even though in reality it needs to integrate with the West considering the tightening stranglehold Moscow has on the country. However, perhaps the American and EU long-term policies will lead to a qualitative change in a few years, if it turns out that Lukashenko was not bluffing this time, or if his successor will be ready to challenge Moscow in the energy sector.



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