Russian Negotiations Causing Friction within Polish Coalition
As a deadline approaches, the long running negotiations between Poland and Russia over a gas supply contract seem to have run into further roadblocks.
The New York Times reports that the European Commission is evidently stepping up efforts to prevent the Russian gas monopoly Gazprom from reaching agreement with Poland.
Just recently, both Russia and Poland has stated that an agreement would likely be signed this month.
However, the Commission seems determined to use the negotiations with Russia were a test case for the EU’s ability to implement a common energy policy. Conversely, it could be viewed that Russia has apparently chosen Poland to test the European Union’s energy policies and in particular, legislation on energy market liberalization (Third Energy Package, 2009) and its anti-monopoly measures.
Poland, amongst many European nations, has been seeking ways to reduce its dependence on Russian supplies in order to increase its own energy security. Plans include a liquefied natural gas terminal at the port of Swinoujscie on the Baltic Sea and the development of natural gas extracted from shale formations.
The deal under negotiation with Gazprom envisages Poland increasing its gas imports from Russia by three billion cubic meters a year, to 10.5 billion cubic meters. However, Poland requires the increased amount only for a limited period of time until the Swinoujscie terminal comes on line. In addition, it seeks to be able to reduce its gas imports from Russia, should it identify shale gas deposits or gain access to natural gas from other suppliers.
Accordingly, Poland wants a flexible long-term agreement for natural gas deliveries from Russia. The proposed agreement however, would lock Poland into higher deliveries through to 2037. Analysts are doubtful of Poland's ability to extract any concessions from Russia. In addition, deal could possibly discourage diversification efforts.
“If that deal went through, investors would shy away from investing in shale or the L.N.G. terminal,” said, Alexander Smolar of the Stefan Batory Foundation. “Gazprom would have stitched up the market for many years.”
What Are the Issues
Poland and Russia came to an agreement on volumes and rates for gas for both Poland and transiting en route to Europe this past January.
The agreement was initially due to be signed earlier this year, but has been delayed as a result of opposition from the European Union which has said that the arrangements are inconsistent with rules that propose independent management of infrastructure and access to gas pipelines by third parties.
“What we want is a level playing ground,” said Marlene Holzner, a spokeswoman for Günther Oettinger, the European commissioner for energy. “Companies wanting to enter the energy market should have access to the pipelines.”
Gazprom is also demanding the exclusive right to use the Yamal pipeline, which runs across Belarus to Poland — not through Ukraine, the main transit point for Russian gas to Europe.
“This is also about weakening Ukraine’s role as a transit country,” said Hryhoriy Nemyria, director of the Center for European and International Studies in Ukraine.
The Polish part of the Yamal pipeline is owned and operated by Europol Gaz, which is owned by Gazprom and Poland’s gas monopoly PGNiG. Each holds a 48 percent stake. These two companies hold the remaining 4 percent in a joint venture, Gas Trading.
If Gazprom and PGNiG had their way, Europol Gaz would retain the ownership, commercial and operating rights of the Polish section of the Yamal pipeline, a move that would prevent any competition or openness.
“It is important that independent companies run this pipeline,” said Ms. Holzner.
Impacting Domestic Politics
The newspaper reports that the negotiations have divided center-right coalition government in Poland, pitting Radek Sikorski, the Polish foreign minister against Waldemar Pawlak, the economy minister and PGNiG.
Though an advocate of forging better economic and political ties with Russia, Sikorski also wants to abide by EU regulations and asked the Commission to scrutinize the draft arrangement to ensure compliance with EU energy policy.
“We want better relations with Russia but not at any price, especially if it means undermining EU legislation,” said a Polish diplomat.
The negotiations are taking place with the backdrop of Poland facing a serious threat of gas shortages this winter. PGNiG has already warned of cuts to industrial customers in the fourth quarter if deal is not reached by October 20th.