Energy 24 June, 2020 10:00 am   
COMMENTS: Kamil Kłysiński

Belarus is ready for diversification because of the threat of Russia’s domination (INTERVIEW)

– It seems that in the face of the growing threat of Russian domination, the Belarusian authorities have finally matured to a more systemic approach to diversification, even at the cost of the inevitable increase in prices – argues Dr. Kamil Kłysiński from the Center for Eastern Studies (OSW) in an interview with Is Belarus bluffing again this time that it wants to diversify? What is new in the current situation?

Kamil Kłysiński: This question is justified because Belarus has already carried out a difficult logistics and costly demonstration of energy independence, which turned out to be only part of the negotiation game with Russia, which is the main oil supplier for Belarusian petrochemistry. It is about the supply of oil from Venezuela in the years 2010-12, which gradually expired as the terms of cooperation with Russian suppliers improved, and finally ceased, even in the more profitable swap format with Azerbaijan. According to available estimates, the cost of these supplies was twice as high as the purchase price of Russian gas. The oil dispute with Russia, observed since the beginning of this year, conditioned by the Kremlin’s pursuit of deepening Belarusian-Russian integration within the Union State, is not only another stage of the crisis between Minsk and Moscow, but also a very serious exam of the maturity of the Belarusian elite in thinking about the state, also in sphere of energy security. When, at the beginning of the year, in response to a reduction in Russian oil supplies, Alyaksandr Lukashenka ordered the commencement of diversification of supplies based on the division into Russia (40 percent of the raw material), northern through the Baltic Sea (30 percent) and southern through the Black Sea (remaining 30 percent) it seemed to be just another attempt to convince Russia to restore supplies on favorable terms. These suspicions were confirmed by the trade secret supply of a batch of oil from Norway, which reached the refinery in Novopolotsk via the Lithuanian port of Klaipeda. Despite the lack of information about the price and transport costs, it was clear to everyone that this material was much more expensive than Russian Urals oil, delivered to Belarus by the cheapest means of transport, i.e. by oil pipeline. However, the significant improvement in conditions since April, as well as the increase in the level of Russian oil supply, did not persuade the Belarusian authorities to give up alternative purchases, and the amount of oil obtained in this way has already exceeded 1 million tonnes (last year, Belarusian petrochemicals processed 18 million tonnes). Minsk purchases from various suppliers (including the USA and Saudi Arabia), thus examining various price options and the profitability of processing oil species with properties different from Russian Urals oil. And although many issues remain unanswered (Belarusian foreign trade statistics remain silent about the price of alternative oil), it seems that in the face of the growing threat of Russian domination, the Belarusian authorities have finally matured towards a more systemic approach to diversification, even at the price of inevitable increase in costs. The first signs of a strategic approach to diversification are also evidenced by the recently announced decision to build the Gomel – Gorki pipeline, separating the two threads of the Druzhba oil pipeline running through Belarus. The goal of this project is to enable the free transfer of oil between the two Belarusian refineries (in Mozyr and Novopolotsk) without the need to use Russian infrastructure.

What is the significance of presidential elections in this context?

The current course of the election campaign indicates a considerable risk of escalation of repression against Belarusian civil society and the most popular opponents. Sergey Tikhanovsky, the most radical participant in the campaign, has been in detention since May 29, and on charges of corruption and managing the criminal group of Viktor Babaryka, Lukashenko’s most popular opponent, who collected over 400,000 signatures of support. Therefore, the emergence of new political prisoners cannot be ruled out. Growing public dissatisfaction, painfully suffering the effects of the recession and disappointed by the authorities’ passivity towards the Covid-19 epidemic from the very first days of the campaign translated into a large, almost unprecedented political activity of Belarusians, ready to stand for several hours in queues to sign their support for alternative to Lukashenko candidates. Against this background, the intensification of the authorities’ repression against Lukashenka’s opponents in the election is already causing a wave of demonstrations throughout the country. In this situation, fearing internal destabilization Alaxandr Lukashenka may decide to use force not only against the opposition but also against ordinary citizens. In this situation, there is a certain probability of a repeat of the December 2010 scenario, when as a result of brutal repression the dialogue with the West broke off and political and economic sanctions were imposed. In this case, the possibility of organizing alternative supplies with both US and EU participation would be severely restricted.

How can Russia react? What is the red line for it?

For Russia, the absolute limit is maintaining Belarus in its sphere of influence, based on a close military and political alliance, and Minsk’s participation in all integration projects proposed by Moscow, from the Commonwealth of Independent States to the Eurasian Economic Union. Energy dependence is an important instrument of Russian domination, but it was used by the Kremlin in January this year. Pressure (reducing the level of supply even to 1/3 of monthly demand) not only did not lead to a greater submission to Minsk, but perhaps for the first time prompted the Belarusian side to serious diversification efforts. At the same time deciding to apply to Belarus the so-called tax maneuver Russia has started to irreversibly reduce price preferences for Minsk, depriving itself of negotiation advantages. In this case, therefore, as long as Belarus remains loyal in the sphere of security, Moscow will have to accept the moderate diversification of Belarusian oil imports so far, being satisfied with an essentially indisputable monopoly in gas supplies.

Are new EU-Belarus energy projects possible, for example with Poland’s participation?

Currently, the Belarusian authorities are very open in the area of ​​diversification of supplies, looking for various options. One of those is the oil transmission project via the Gdańsk oil port and then the Polish section of Druzhba directly to the refinery in Mozyr. The first steps have already been taken in this direction, including tariffs for the transport of raw material were set. However, the reverse of Polish part of Druzba requires additional investments on the section between Płock and Adamów, located near the border with Belarus, so that it is possible to pump oil simultaneously in two directions, which would meet the needs of Polish and Belarusian petrochemicals. And although PERN initially announced its intention to carry out such an investment, it is a project that requires time and large financial outlays. Another idea, also potentially beneficial for Belarus, would be to use the northern thread of Druzba, which had been out of order for many years, from Nowopołock to the Latvian port in Ventspils. However, in this case financial and property disputes between the Latvian and Belarusian parties are an obstacle.

Interview by Wojciech Jakóbik