The Russian Gas Distribution to Poland and Germany

Topics: Soviet Union, Russia, Natural gas Pages: 14 (5370 words) Published: May 31, 2013
The Russian Gas Distribution to Poland and Germany
Geopolitics of Natural Gas in Belarus

Circiu Alexandra
Facultatea de Relatii Economice Internationale
Specializarea: Comunicare de afaceri in limba engleza
Forma de invatamant: ZI
Anul de studiu: I
Grupa 1
Seria A
Natural gas is rapidly gaining in geopolitical importance. Gas has grown from a marginal fuel consumed in regionally disconnected markets to a fuel that is transported across great distances for consumption in many different economic sectors. Increasingly, natural gas is the fuel of choice for consumers seeking its relatively low environmental impact, especially for electric power generation. As a result, world gas consumption is projected to more than double over the next three decades, rising from 23% to 28% of world total primary energy demand by 2030 and surpassing coal as the world’s number two energy source and potentially overtaking oil’s share in many large industrialized economies. The growing importance of natural gas imports to modern economies will force new thinking about energy security. This study is meant to investigate the geopolitical consequences of a major shift to natural gas in world energy markets and to examine the interplay between economic and political factors in the development of natural gas resources; our aim is to shed light on the political challenges that may accompany a shift to a gas-fed world. In the early 1990s the giant Soviet enterprise of Gazprom began work on a new project to export gas across Belarus to Poland and Germany. This was the first (and so far only) large new Russian gas pipeline project constructed after the dissolution of the CMEA system and the Soviet Union. This project remains the single largest expansion of gas transmission through Belarus. Whereas nearly all Russian gas exports to Western Europe traveled through Ukraine (and still do today), by the middle 1990s theft and risk of interruption of gas during Ukrainian transit had focused Russian minds on finding alternative routes. Finally, although this project was mainly conceived to serve the German market, it also was pursued partly with the aim of supplying the largely virgin gas market in Poland. This project is called the Belarus Connector (BC). In Gazprom’s vision, this project would have originated in the giant gas fields on the Yamal Peninsula and supply large volumes of gas to European markets. Actual construction of the Belarus Connector began when the largest single user of gas in Germany (BASF) sought alternative supplies that would be less costly than those of state monopolist Ruhrgas. Gazprom welcomed this overture since it, too, sought to bypass Ruhrgas but for different reasons; it thought that alternative marketing arrangements could recover some of the rents that had traditionally gone to Ruhrgas by boosting the prices that Gazprom received for its exports. The German state played little positive role in making this project happen; it cautiously welcomed competition but stood ready to intervene if these new entrants caused too much harm to the well-connected incumbent Ruhrgas. The Polish state favored the project but contributed little as well; Poland remained wary of any scheme that would raise dependence on Russia, but at the same time gas figured in a vision for new cleaner electric power generation and the project would also help to tie Poland to Germany’s gas market. The practical effect of this relatively weak involvement of key governments was to raise the risk for commercial investors, slow the pace at which this project actually proceeded (in contrast with the earlier massive Soviet gas export projects), and favor elements of the Belarus Connector that could be brought online with relatively low risk and greater ease once an investor decided to allocate the capital. Thus the smallest and most scalable aspects of the project were pursued, while those that required the grandest visions and the largest...
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