(This article was published in WAVE No.4 - February 2007)

Russian Gas Crisis

Europe Unsecured

Energy crisis between Russia and Belarus at the end of 2006 and the beginning 2007 poses a threat to political and economic stability of all Europe


By SOFIYA FEDYNA
from Lviv, UKRAINE


The world of 21st century surely can be named the world of the energy resources problems. Numerous tensions and wars to receive an access to the sources of gas and oil, political and economic games of the countries that posses this kind of resources, and problems of the countries who lack in them. As we know from early childhood is that New Year brings surprises. May be Russia conceived itself to be a Santa Clause because the second year in a row it makes surprises for its neighbors and partners. The only problem is that these surprises are not pleasant - the stoppages of gas and oil supplies. The year 2005 it was Ukraine. The year 2006/2007 - Belarus.

Déja vu

In what threatened to be a repeat of last year's crisis with Ukraine, Gazprom has demanded that Belarus pay the full market price - more than double what it was paying before - for gas imports and sell shares in Belarus' national gas infrastructure, or face having the Russian gas taps turned off on New Year's Day.

From the very demise of the USSR Belarus was the only country that fully supported the position of Russia. together they planned to build a new Union, first based on them two, and then they wanted Ukraine and Kazakhstan to join. - to renew the Russian empire in XXI century. For this Belarus decided even to give up the part of its sovereignity. But year 200 Russia made some demands to Belarus without suggesting something in return and Lukashenka decided that the time has come to stay on the position of the state interest. In its turn Russia decided to show that there is only Russian interest and everyone who will stay on its way will have a great problems.

Belarus, a country of 10.3 million people sandwiched between Russia and Europe, has refused Gazprom's demand. Another important circumstance is that more than 20 per cent of Russian gas exports go through Belarus to Western Europe, and the European Union is increasingly reliant on Russian energy supplies. Russia supplied 24 per cent of the EU's gas last year, according to data from European gas federation Eurogas, representing 40 per cent of all gas imports to the bloc. So the problems between Russia and Belarus, that along withUkraine are the main transit countries of the Russian gas, means without any doubts the problems for Europe.

As Belarusian officials claimed the second Gas War had been announced. The Head of Gazprom board Alexei Miller promised that if Belarus disagrees to buy the gas on a higher price, from the 1st January the supplies will be stopped. Here the international and Belarus society understood that Russia is able to use as a weapon not only gas question but also oil and even sugar (as the facts show - on the table of Mikhail Fradkow there is a project of a direction to introduce the import duties on Belarus sugar at a rate of 8,1 % of its price.). But Belarus did not want to concede.

With the beginning of the tension between Russia and Belarus Energy Minister Alexander Ozerets warned that cutting off Belarus would also mean shortfalls for Europe. Gazprom export Chief Alexander Medvedev said it would try to compensate for lost volumes, but shortfalls may be unavoidable. And if Europe as it appeared had stockpiles of energy resources to wait for the conflict resolution, the Belarus was able to survive without Russian resources only for several days.

Furthermore, the head of Russian Gazprom Alexei Miller stated that with the step by step increase of price on gas for Belarus it will mount to the European level. But anyway it is the best price among the countries of the former USSR.

The contract between Russia and Belarus had been signed two minutes before the New Year - 31st December 23:58. It foresees 5 year period of gas supply and transit during 2007-2011. Belarus paid Gazprom a highly subsidised $46.68 per 1000cum of gas, and Gazprom originally demanded a hike to $200, closer to western European prices, unless Belarus agreed to sell half of its pipeline operator, Beltransgaz. In 2007 Belarus receives gas for $100 for 1000 cum of gas. But in the few next years Russia will receive control over the operator of Belarus gas transportation system. The price of Russian gas for Belarus in 2007 is $100 for 1000cum of gas, the price from January 1st, 2008 - according to the prices for Europe predict the discounts from the market price at a rate of 67%, 80%and 90% for 2008, 2009 and 2010 respectively. It was the end of gas conflict but the beginning of Oil problems.

Till the January 1st the oil supply to Belarus had been exempted from export duties. But from the January 2007 Russia imposed the duty on oil supply at a rate of $180,7/ton. In 2007 Belarus is going to by approximately 20 millions tons of oil - so the potential losses from this duty - $3, 6 billions. In response to this Belarus introduced from the January 1st the duty on transportation of Russian oil through Belarus at a rate of $45/ ton. As a result - oil pumping through the pipe lines of Gomeltransnafta had been stopped on January 8th , Belarusian side motivated the stoppage of transit with the fact that Russian company Transneft had transferred Russian oil through Belarus border without it being declared and without paying customs duty. The first victims of this Russian-Belarus resistance were the European countries that felt the shortages in oil supplies. But they were ready to stay for some time without new supplies as they already had an experience of 2005/2006. On the January 12 the governments of Belarus and Russia have signed an agreement about the terms of oil supply to Belarus and export of oil products processed in Belarus.

Untrustworthy partner

The image of Russia as a reliable energy resources supplier had been infringed through the problems with transit through Belarus. The EU has been wary of Moscow's energy policies since last year when Gazprom briefly cut supplies to Ukraine on New Year's Day, with knock-on effects for European consumers down the line during a bitter winter in Europe. The pressure on Belarus fits a pattern of heavy-handed negotiating by Moscow as it seeks to ensure more lucrative gas supply contracts with neighbouring former Soviet countries. Under similar pressure from Gazprom, Georgia agreed to a new contract at a price of $300 for 1000 cubic metres.

The EU had issued a letter to Russia and Belarus about the inadmissibility of the shortcut in energy resources supplies. In its turn the Secretary of the State of Germany Joachim Wermling mentioned, that with the last conflict between Russia and Belarus, during which Russia stopped the oil supplies to Europe, Europe itself has received very important lesson. "This serious lesson is that everyday it could happen that oil pipe line might be blocked." He also stated that European officials are anxious of the reliability of the supply of all energy resources from Russia, and as a result of mentioned above actions Russia had lost the status of reliable partner for Europeans.

Trying to show its self-sufficiency, Russia has found the way how to decrease the dependence from the Belarus in a question of gas transit. For this Russian company Transneft intents to expand the Baltic transportation system. Baltic transportation system was put into operation in 2001. At the beginning its carrying capacity was 12 billions tons per year. At the moment the number increased up to 76 billions tons per year.

At the same time Europe doubts in reliability of new gas pipe line between Russia and EU. The EU Energy Commissioner Andris Piebalgs is confident that without trust in the partners the Northern gas pipe line between Russia and EU can not be reliable. "We can't create the system of stability without trust", stated the Commissioner.

Gains or losses?

As it was mentioned above from the January 1st after Minsk introduced the duty on Russian oil that was transported through Belarus territory, Moscow refused to pay it and stopped the oil supply to oil pipe line Druzhba that in its turn caused the hold up in oil supply to Europe. But already on the January 10, Minsk announced that it canceled this duty. This time along with high prices introduction Moscow bargained also the part of Belarusian sovereignty.

For Russia it has become the turning point: for too long time it awaited for integration with Belarus, having supplied gas and oil at a very low price (the same as on internal market of Russia.) The expectations were in vain and Russia introduced the real market prices for Belarus.

But on the other hand nowadays price for gas is the highest price ever paid by Belarus: except from the $100 price Belarus will pay with the half on the shares of Beltransgas concern that are to be bought by Gazprom during the next 5 years.

Interesting fact is that this agreement could have happened only upon the consent with the President of Belarus. But previously he claimed that will never sell the Belarusian transportation system and 80% of the citizens of Belarus support this position. This agreement had hit heavily the image of the President Lukashenka in Belarus.

But the problem number 1 for Belarus is that $180 duty for the ton of crude oil means the failure of Belarusian economic miracle that based on resells of Russian oil to the Western Countries. Anyway this time Russian will not proclaim Belarus to be the enemy number 3 after Georgia and Ukraine. Firstly, for Russia it is favorable to have in Europe some kind of dictator, less democratic than Russia itself, for critics to fall on the last dictatorship in Europe. Secondly, have not yet humbled with the losses of the former influence in the former USSR republics, it supports Belarusian despot who is fully substituted to Russia. Belarus has preserved sovereignty de jure but is it independent de facto?

The show must go on...

In this situation we can make different conclusions. But the most interesting are new questions that have been posed by the recent conflict: What happened in relations between Russia and Belarus that Russia decided to make so aggressive actions? Why the dictator Lukashenka disagreed to the full integration with the former partner? Whether it is possible to renew the dialogue between Belarus and European? Does it mean that Belarus wants to stay independent from Russia at least in political terms?

Russia has been blamed for using gas pipelines as a weapon against West-leaning Ukraine and Georgia. But unlike those countries, Belarus has no ambition to join NATO or the EU. So we can make a conclusion that the dispute between Gazprom and Belarus centres not just on Gazprom's demand for full market gas prices in the ex-Soviet republic, but the Russian monopoly's bid to take control of Belarus' pipeline network. This would give the Russian state-owned giant an important strategic foothold on the EU's eastern border. Thought the gas and oil conflicts at the definite moment are resolved, this situation has showed to the Europe two really important things.

First - energetic security appears to become one of the most important issues of international politics in general and of security of every definite European country.

Second - that Russia does not refuse from power politics and tries to dictate its own rules in energy policy regardless of position of the other countries. And what is more stressing is that Russia becomes the leader among the countries which mine energy resources now.

For all who does not want to become a weak partner of Russia there is a task to elaborate a new Energy strategy. In this context we have to thank to Poland that it blocked the EU agreement of cooperation with Russia, as Russia has not signed yet the European Energy Charter. This Charter will introduce the rules of fair and open cooperation among the countries who posses Energy resources and those who are to buy them. Another way out is to elaborate new sources of energy that may become much cheaper and nature friendly.


(Published: 10.01.2009.)