27 February 2020, Thursday, 8:37
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Lukashenka Made a Strategic Mistake in the Oil Conflict, Polish Expert Says

Lukashenka Made a Strategic Mistake in the Oil Conflict, Polish Expert Says

Political will is needed for alternative oil supplies.

Against the backdrop of the oil conflict between Russia and Belarus, one can increasingly hear statements that Minsk will seek alternative ways for hydrocarbon supplies. Among the routes, the Belarusian side called oil supplies through Poland.

January 14, the press service of the Polish operator of Druzhba, PERN, stated that deliveries to Belarus were currently impossible.

What steps can Belarus take? How can the oil conflict affect the entire region? Is there a formula of energy security for Belarus?

All these questions Charter97.org addressed to the analyst of the Polish Institute of International Affairs Maciej Zanewicz.

- Mr Zanewicz, can Poland supply oil to Belarus via the Druzhba oil pipeline?

- Such supplies are technically possible. When the crisis with "dirty oil" began, the Druzhba pipeline worked in the reverse mode, but only to the border with Poland. On the territory of Belarus, two lines out of three worked in the reverse mode. Poland can technically do the same but needs investments. This is the position of the Polish PERN operator.

For Poland, it means that Belarus should present a political declaration on the purchase of oil from Poland. We also need guarantees that it won't be a short-term contract for several months, but a long-term one of several years. There should be a clear business plan, guarantees that the investment will be justified. This is the main problem. It has to be a thoroughly-developed investment project, which is impossible to develop within a few days.

But the fact is that Russian oil is cheaper for Belarus. The contract between Minsk and Moscow provided that Belarus buys oil at prices below world prices. Until recently, the price for Belarus was about $49 per barrel, given that in 2019 the average price per barrel of Brent oil was about $67. This difference is quite significant.

Now Russia is taking the so-called tax manoeuvre, which increases oil prices for Belarus. Minsk is seeking compensation to ensure lower-than-market prices for oil.

But if Belarus fails to agree on compensation, a scenario with the partial purchase of oil from Poland would be available. Besides, Lithuania is interested in this. It announced the possibility of oil delivery by rail. The only problem is that it is physically impossible to deliver large quantities of oil from Butinge port to Belarus.

- Do you think the oil conflict between Moscow and Minsk poses a threat to the whole region?

- I think it does not. If we mean the delivery of oil through the Druzhba pipeline, then its destination is Germany. Russia is simply not interested in spoiling its relations with Germany. So I don't think any disruptions in delivery are impossible.

Besides, there is a possibility to increase deliveries through the oil port in Gdansk. By the way, that's where oil for Belarus would come from if it was decided to buy it from Poland. Crude oil would come to the Gdansk oil port, then it would come through Płock and Adamów to Mozyr.

- What mistaken steps of Minsk led to the oil crisis?

- There was a strategic mistake. It was wrong to make the economy dependent on cheap Russian oil. The Belarusian model relied on the purchase of cheap oil from Russia and budget revenues from the sale of oil products. It made Minsk dependent on the political will of the Kremlin. All this was partly used by Russia: it started buying up Belarusian infrastructure and industry. Russia's desires were quite natural and predictable.

The Belarusian economy was not diversified and refineries were repaired too late.

- How should Belarus build its energy security to cease dependence on the Kremlin?

- Belarus should focus on supply diversification - all countries in the region, from Poland to Ukraine, are doing this. It needs to look for new sources of supply, but it depends on a political decision. Belarus should declare that it stops building the economy tied up to cheap oil from Russia. In the initial stages, it would lead to higher financial expenditures and higher prices for raw materials. But all countries in the region that have decided to become independent of Russia pay this price. All these expenses are covered from a strategic perspective.

However, it seems to me that Lukashenka is not thinking strategically, but only for a few years ahead. He tries to satisfy his interests and his entourage.