Belarus Loses Out on Gazprom Nord Stream Bypass

Technology and investment are further isolating Belarus, whose dolorous geographical position betwixt the Russian Federation and its European natural gas markets to the West once upon a time seemed to guarantee Minsk transit revenues.

Now, a subsea pipeline laid under the Baltic stands ready to render the Belarus pipeline network inherited from the USSR largely irrelevant.

Bummer.

Even worse for the Belarusian government, quite aside from the loss of its revenue stream from transit fees, the opening of the subsea Baltic Nord Stream by the Russian natural gas state-owned behemoth Gazprom is threatening to reduce the transit of gas through Belarus via the Iamal-Evropa pipeline, according to the Gazprom-owned Russian radio station Ekho Moskvy.

After the Nord Stream pipeline opened on 8 November, throughput has increased by more than 50 percent since opening, and Nord Stream can now transit 5 billion cubic meters of natural gas per annum to Europe.

Nord Stream’s opening represents yet another humiliating slap in the face for the beleaguered government of Aleksandr Lukashenka, in power since 1994, and frequently described as “Europe’s last dictator.”

But Lukashenka in his negotiations with Moscow has now seen his position weakened, perhaps irrevocably, by the opening of Nord Stream.

After the 1991 collapse of the USSR Belarus saw its elderly Soviet-era pipeline network as its key bargaining chip with Moscow, as Gazprom attempted to solidify its contracts with its European consumer base, a mutually beneficial arrangement which had begun in the 1980s.

Minsk tentatively attempted to raise its transit fees, believing that its pipelines were indispensible.

In return, Moscow simply incrementally ratcheted up its natural gas prices to Belarus towards world prices.

In the complicated, increasingly expensive minuet between Russia and Belarus, Minsk folded. Five months ago, the handwriting was on the wall. During a meeting with Russian Prime Minister Vladimir Putin, Belarusian Prime Minister Mikhail Myasnikovich stated that Belarus was prepared to sell seven of the most valuable Belarusian enterprises before adding, "I think that we have become too fixated on issues pertaining to petroleum processing and the trade in petroleum products."
 
Up for grabs by rich Russian investors? A number of energy concerns that Belarus has steadfastly refused to consider selling up to now, including the “privatization” of Grodno Azot, to be privatized with Sibur and Rosneft; Naftan with Lukoil; the Mozyr Oil Refinery with Rosneft; Mobile TeleSystems with the Sistema Joint-Stock Financial Corporation; the Minsk Truck Plant with Russian Machines and the Rostekhnologii State Corporation and Integral with Rostekhnologii.

But the crown jewel previously beyond price, now on the table?

The Belarus pipeline network Beltransgaz, to “partner” with Gazprom.

The entry of Russian firms into the Belarusian market marks a humiliating retreat for Lukashenka, who for nearly two decades had repeatedly resisted selling off the country’s energy assets, particularly the Beltransgaz pipeline network, in return for Gazprom canceling the country’s massive debts for natural gas.

But what about Ivan Sixpackskii?

Well, the average Belarusian consumer will be delighted to know that, following an agreement signed on 25 November between Beltransgaz and Gazprom, under which Gazprom will buy an additional 50 percent of Beltransgaz, making it a de facto monopolist owning 100 per cent of the Belarusian gas transportation system, in charge of its annual throughput of 15-16 billion cubic meters per year.

But for Belarusian nationalists, the deals still have a silver lining, as according to the Belarusian State Property Committee, Belarus will pay $165.60 per 1,000 cubic meters (tcm) for gas next year, compared with an average $279 tcm the country paid in the third quarter of 2011.

Lenin once said, “If you want to hang a capitalist he’ll sell you the rope to do it.” Belarus has gone from collecting tolls on its energy highway to selling twine, and maybe getting smothered in gas.

By. John C.K. Daly of Oilprice.com