the energy dynamic on the borders of the eu belarusian russian relations
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The Energy Dynamic on the Borders of the EU Belarusian Russian Relations
Ministry for Foreign Affairs of Finland
11th October 2006
Aleksanteri Institute Eurasia Energy Group
www.helsinki.fi/aleksanteri/energy/
General Overview
Belarus is a challenge for EU as well as for Russia This challenge is comprised of symbiotic political,
economic, and military aspects; We should avoid simplistic dichotomies:
democratic/dictatorship; market/planned economy; EU /
Union State; We want to find new European approaches to the Belarus
issue; Now it is time for creating conditions for forthcoming
changes in Belarus; and The European Union should be in a position to be an
active player when changes in Belarus occurs.
The Pathology of Lukashenka regime
Lukashenka is popular because of his model of transition;
Lukashenka is neither a communist, nor a puppet of
Moscow;
Lukashenka utilises the Soviet legacy and incorporates
nationalist rhetoric;
Lukashenka’s transition model has many economic deficits
but it has provided the solution to many social problems; and
The Union State is to a large extent cheap talk of integration
rather than a real political process.
An Exit Strategy for Lukashenka?
Lukashenka has avoided exit strategies before by
extending his presidential term
Previously identified exit strategies for Lukashenka:
1. President of the Union State under the Yeltsin
administration (failed)
2. President of the Union State under the Putin administration
(increasingly unlikely)
3. President of the Union State after Putin in 2008 (highly
unlikely)
Is time running out for Lukashenka?
Deadlines for Lukashenka:
1. Completion of the NEGP in 2010; and
2. When his presidential term ends in 2012.
By 2010, the EU should be in the position to
diplomatically assist in creating the conditions conducive
to an exit strategy for Lukashenka.
The Energy Aspect: Roots of the Gas War
Personalities: Yeltsin, Putin and Lukashenka;
Politics: Sovereignty & Unity;
Economics: Diversified Ownership of Soviet Industrial
Core;
Finance: Weak Institutions, Barter Transactions, & Debt
Service; and
CIS Member State Relations & Changing International
Conditions.
The Energy Aspect: Overall Relations
Energy Dependence (84% imports 98% NG - 75% Oil RF) Continuing Indebtedness to Gazprom (158m 01.2006 to
64.1mUSD as of 07.2006); Interruptions in Gazprom service (40% reduction in 2000); Lack of Asset Swap Agreement (BelTransGaz); Stable Alternative Transit Country (Northern Lights &
Yamal Europe Gas, & Northern Druzhba Oil Pipeline); No documented siphoning or theft (Gazprom 720m USD
Loss in Ukraine 1999); and Low Domestic Level Gas Price (46.68USDmcm 2004) for
Belarusian Consumers (10m).
The Energy Aspect: BelTransGaz
Cheap Gas & Asset Swap (April 2002); Swap of BelTransGaz giving Gazprom 50% Ownership
(BelTopGaz’s 6000 km of Domestic Pipeline Network &
Northern Lights Gas Pipeline); Russian Domestic Rates for Belarusian Consumers to
2007; Agreement coincided with Union State Negotiations
(Terms favourable to Russia & Putin); Lukashenka reacts (BelTransGaz is not privatised); Gazprom retaliates; does not fulfil contract
10.2bcm/18.5bcm; and Crisis averted; BelTransGaz swap to go ahead; gas
prices raised to 40USD/mcm in 2002.
The Energy Aspect: Outcomes
Signalling game tied to Union Treaty between the Kremlin & Minsk;
BelTransGaz asset swap cancelled / To be privatised; price tag now at
5bUSD (Lukashenka 29.09.06);
No Union State while Putin is President of RF (Lukashenka 29.09.06);
Prospect of increased gas prices for Belarusian domestic consumers
(47USDtcm 2004 to 200USDtcm in 2007); and
Situation threatens optimal transit of gas to Europe through the Yamal
Europe & Northern Lights Pipelines.
Russia via
Ukraine
(Soyuz)
Russia via
Belarus
(Yamal
Europe)
Algeria Norway
Extraction 14.3 14.3 16.1 44.6
Transport 75.4 61.4 28.5 30.4
Transit
fees
10.0 5.7 3.9
Total 99.6 81.4 48.0 75.0
Cost of gas supply to EU 15 (USD per tcm) in 2004
Source: Ferdinand, Tochitskaya & Giucci (2004): ”Belarus as a Transit Country”. IPM Research Center, p. 3.
Transit fees, the competitive advantage of Belarus
Transit fees for Russian natural gas exports have been
one fifth to one third lower via Belarus than through
Ukraine
Transit fees:
Northern Lights 0.75$/1000m³/100km
Yamal Europe 0.46$/1000m³/100km
Lukashenka has threatened to raise transit fees for NG, if
Gazprom raises the Belarus’ domestic gas prices
Diversification of the Russian NG export routes
Ukraine’s share of transit of the Russian natural gas
exports to area outside the former Soviet Union (to
Europe).
Before 1999 approximately 93-95%
73% in 2005 (Yamal Europe & Bluestream (To Turkey))
66% after 2010 (NEGP)
Natural gas export routes/pipelines via Belarus have
played an important role in Russia’s/Gazprom’s attempts
to reduce the transit monopoly of Ukraine & diversify
export routes.
Yamal Europe (Yamal I) gas pipeline
Construction started 1994; Inaugurated in September 1999; The route runs from Western Siberia through Belarus and
Poland to Germany; 575 km in Belarus territory; Construction estimated to be completed at the end of the
2006; Pipeline owned by Gazprom, but serviced by BelTransGaz; Land on which the pipeline is built belongs to Belarusian
state; Land is leased to Gazprom on long term contract; and More compression stations are needed to enable the
pipeline to operate at full capacity
From Yamal Europe to NEGP
Yamal Europe increased Gazprom gas exports through
Belarus from 7% to 15%; Yamal Europe increased the role of Belarus as a transit
country, but didn’t end disputes with all CIS transit states; Interruptions in deliveries to Europe through Yamal Europe
pipeline in early 2004 and other frictions between Belarus and
Poland gave Gazprom the incentive to began planning for a
new alternative gas pipeline that would by-pass transit
countries (NEGP); Earlier there existed plans to build the Yamal II pipeline that
would have doubled Gazprom’s NG export capacity via
Belarus; but That project has so far been put on hold by the priority given
to the NEGP.
Gazprom NG export pipelines through Belarus
Pipeline Capacity
Billion m³
% of the Gazprom’s
total export
capacity (239 bn.
m³)
Northern Lights
(Soviet era pipeline)
Owned & operated by
BelTransGaz in Belarus
25 10.5%
Yamal Europe I
(Since 1999)
Owned by Gazprom &
serviced by
BelTransGaz in Belarus
28 11.7%
Northern Lights &
Yamal Europe I
53 22.2%
Figures from: Heinrich
(2006): ”Gazprom – A
Reliable Partner for
Europe’s Energy Supply?”,
Russian Analytical Digest,
1/2006, p. 4.
The role of the NEGP for Belarus gas transit
With the NEGP operational after 2010 Belarusian routes share
of Gazprom’s total export capacity drops from: 22.2% (in 2005)
19.8% (after 2010)
The NEGP’s capacity (28 billion m³) is the same as the Yamal
Europe pipeline Option to build another pipeline which would double the NEGP NG
transport capacity exists
Both NEGP and Yamal-Europe transport natural gas to
Germany (Western Europe) In case of soured relations between RF and Belarus the NEGP
could completely substitute the Yamal-Europe In such a scenario the remaining Belarus export pipeline (Northern
Lights) would account for only 10.5% of the Gazprom’s total exports
Oil export pipelines
Belarus has also been a major transit country for Russian
oil exports;
The Northern Druzhba oil export pipeline goes through
Belarus to Poland and Germany, with a branch line to
Ventspils oil export terminal in Latvia;
In 2003 approximately 50% of Russian oil exports to
Europe were transported via Belarus; and
Due to a leak in the line, Northern Druzhba is at this time
under repairs & out of commission for the foreseeable
future.
EU’s Security of Energy Supplies
One of the main principles of EU energy policy alongside
markets and competition, and sustainability Springs up from the EU’s relative and worsening energy
poverty and amplified throughout 2006 after the often
misrepresented Russian-Ukrainian ‘gas war’ Key issues:
New energy crisis management rules and storage
systems Solidarity in energy crises Energy savings and efficiency Concerns of the existing energy mix Diversification of supplies only a recent but a major
concern, and can in practice pursued only partially
Belarus in EU’s Security of Supplies Puzzle (I)
New energy crisis management rules and storage systems: mostly
an internal EU measure not overcoming dependency on external
supplies and transit countries; Belarus not needed
Solidarity in energy crises: mostly an internal EU measure not
overcoming dependency on external supplies and transit countries;
at best, some assurances from Belarus for not illegally siphoning
gas intended for EU market from its transit pipelines in any possible
Russia—Belarus ‘gas war’ a la the Russia-Ukraine case in 2005—6
Energy savings and efficiency: mostly an internal EU measure in the
absence of its effective export to the ‘east’; reduced Belarus
consumption through extensive EU technical aid and info campaigns
would relieve some Russian resources for export to the EU area
Belarus in EU’s Security of Supplies Puzzle (II)
Concerns of the existing energy mix: Gas likely to remain
key part of EU consumption due to the expensively built
infrastructure, long-term supply agreements and
sustainability principle; Belarus pipelines one part of the
strongly interdependent Russia—EU gas grid
Diversification of supplies: Ventspils scenario possible
with the NEGP by 2010 and other new pipelines; Belarus
can potentially play a role as a transit state for
diversifying EU supplies outside Russia, although no
such projects are currently planned
Conclusion
In the short to mid-term, Belarus likely to remain one part in the
EU security of supplies puzzle
Non-cooperative Belarus can damage energy security of
individual EU countries disproportionately in the short-term
Cooperative Belarus can best be ensured by not repeating the
same mistakes made in the early 1990s with Russia;
This means a Europe of principles and values must be
complemented by a ‘wider Europe’ of geography, pipelines, joint
interests, movement of people, information gateway.
Belarus should be provided the prospect of a step-by-step
integration with thus understood ‘wider Europe’
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