Posts Tagged gas

Tug-of-Gas

Posted by Maryna Rakhlei in EU on June 24, 2010

Ooh, exciting! What do you understand better – Star Wars or the gas wars? The latter, you said? Are you from Gazprom?

I don’t understand much about the gas wars. But one thing is very clear: it’s all politics and has nothing to do with economic relations.

On Wednesday Belarus authorities suddenly broke silence. The First Vice Prime Minister came into the spotlight to explain who owes what and why. Now Belarusians understand more about national gas transit matters than their own monthly utility bills.  But there still a lot of why’s left.

To cut a long story short: Moscow gave Belarus five days to pay back the difference between what it was paying since January 2010 and the price that Russia expected for its gas. After five days and no money Gazprom started cutting the gas off.

After a couple days (and a 60 percent cut in gas supply) Minsk announced (whoops!) that Russia owes almost the same sum for transit: Gazprom did not pay for Belarusian services since November 2009 and Belarus itself started cutting off the gas going to Europe…

Why couldn’t they have settled these matters long ago? Why did Minsk keep silent over its position for so long? Why was Moscow suddenly so harsh and decisive? And Minsk so carelessly and bravely pro-active?

On Wednesday the Vice Prime Minister announced that Belarus has paid its dues and gave Russia 20 hours to do the same. Moscow sent its money on time. The tug-of-gas is over for now.

It’s interesting that the sums of the debts don’t square up: Gazprom wanted $192 million and got $187 million, Belarus demanded $260 million and received $228 million. Where does the difference come from? From politics. The contracts have formulas, and presidents meet to bargain and negotiate these formulas. Then afterwards they still believe they can pay what they see fit and then hope to persuade each other that the new price is OK.

And everyone was satisfied with the set-up until the day came they couldn’t agree.

The main stumbling block is the Customs Union of Belarus, Kazakhstan and Russia. Minsk has a lot of problems with this creation, but the biggest is oil: there will be customs and duties for the Russian oil coming into Belarus (but not to Kazakhstan!). And we just can’t agree to it – duties are out question for the Union State of Belarus and Russia, they can’t be imposed.

There are a lot of things to discuss now (gas price, transit price, Customs Union) and any of them might be sensitive for Belarus on the eve of presidential election.

One more thing is clear: the Belarusian style of leadership is useful for the Kremlin. It’s unpredictable and hard to deal with. But it won’t be invited to join the EU or Nato any time soon. So it’s worthwhile having it on a short leash of not-really-market but not-really-brotherhood relations.

It’s the end of the gas war, but only for the EU (and only for now?). There are still a lot of why’s and what-comes-nexts for Minsk and Moscow, which might see the beginning of a new war of nerves. And a break-away story for Belarus?

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Don’t Stop the Flow

Posted by Maryna Rakhlei in EU on January 5, 2010

It’s the New Year! Time to negotiate new oil and gas contracts!

Every year people hope that the consumers of Russian gas and oil will agree with Moscow on new deliveries. But same old, same old. We don’t even know the true nature of the political and economic deals that underlie the negotiations every December and January. Official information is very scarce.

If you go to a shop for a bottle of cognac, you look at the price and take out your wallet to pay. The energy problems are the result of lack of transparency, of the triumph of geopolitical considerations over mathematical formulas in calculating energy prices and of the desperate dependence of a number of countries on Russian supplies.

I get the impression that the Kremlin considers the annual hydrocarbon disputes to be mere lovers’ tiffs: “Hey, no harm done, we’re still neighbours.”

One year ago Ukraine, and later a large chunk of the EU, suffered shortages of Russian gas. The year 2010 started with the Belarus-Russia oil row. Funnily enough, the oil dispute arrived at the same time as the new Customs Union of Belarus, Kazakhstan and Russia, which came into existence on 1 January. Moscow and Minsk are now continuing talks on a new oil agreement, following a spat over transit tariffs.

Russia says oil deliveries to Belarus were stopped on 1 January and resumed three days later. Belarus says that oil is being delivered continuously. But it has threatened to cut electricity supplies to Russia’s Kaliningrad enclave due to the lack of a tariff agreement. Lithuania, which was forced to close its Ignalina nuclear plant at the end of last year is watching nervously.

Belarus buys Russian oil for internal purposes as well as for refining and selling it on to Europe. To get a share of Belarus’ oil incomes, Russia imposed a reduced duty – around one third of the levy applied to other countries – on crude oil sold to Belarus. This arrangement expired last year, with Minsk claims that crude oil should be supplied free of duty within the Customs Union. Moscow offers no reductions. But could think of some 5 million tons of oil that Belarus will be getting duty-free for its internal needs.

Meanwhile frosts, expectations of an improving economy and the Minsk-Moscow dispute have catapulted crude oil prices to their highest close in nearly 15 months, hurdling $81 a barrel.

And it remains highly symbolic that the commercial situation around the oil pipeline, which is called Druzhba (the Russian word for “friendship”), is as messy as the broader efforts to create a Russia-Belarus strategic partnership. Russian deputy prime minister Igor Sechin assured that talks on oil deliveries would be continued due to the pair’s “exclusive” bilateral relations. And the talks are still going on…

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