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Poland: Government Plays Down Gazprom-EuRoPol Memo

Polish PM Donald Tusk
Polish PM Donald Tusk

Yamal II – a view from Poland

The Polish Prime Minister has expressed surprise at Gazprom’s announcement that a pipeline transporting gas to Poland, Slovakia and Hungary and circumventing Ukraine will be operating by the end of the decade.

“I don't know anything,” claimed Donald Tusk, apparently unaware of a memorandum signed in St Petersburg.  He added that the Russian proposal is not in line with the government’s strategy of diversification of gas supplies to Poland.

This past Friday April 5th, Gazprom and EuRoPol Gaz S.A, owner of the Polish section of the Yamal pipeline, signed a memorandum of understanding on the construction of a new branch of the gas pipeline. A feasibility study is to be prepared within six months.

The connection would start from Belarus, where the gas transmission system is controlled by Gazprom, crossing Poland, where the independent gas transport operator was established and where implementation of the EU rule of TPA (Third Parties Access) guaranteeing effective, non-discriminatory access to the gas transmission networks is expected.

Finally the connection would reach Slovakia, where it would merge with the Brotherhood pipeline, the major export channel for the Russian gas, and a continuation of Ukraine’s transit route to Europe.

The new pipeline would then circumvent Ukraine, which for years has been in dispute with Russia over gas prices and control of transit infrastructure.

According to the Jamestown Foundation, “The operative goal of this project is to increase Russian pressure on Ukraine to cede control over its transit pipelines to Gazprom.”

Signed in St Petersburg

The MoU was signed by the CEO of Gazprom Alexey Miller and on behalf of EuRoPol Gaz, by Miroslaw Dobrut, who is also vice-president of the state-controlled Polish gas firm PGNiG.

EuRoPol Gaz is the owner of the Polish section of the Yamal-Europe gas transit link, the only land pipeline connecting Russia with Europe, not via Ukraine, but via Belarus and Poland. The Yamal-Europe pipeline has 33bcm/year capacity and was completed in 1999. Initial plans to construct two parallel legs were abandoned, when Russia chose to build Nord Stream pipeline.

EuRoPol Gaz is a joint venture of Gazprom and Polish state-controlled gas company PGNiG, (both 48%), while the remaining 4% is owned by Gas Trading (with over 90% shares held by PGNiG, Gazprom Export, and Bartimpex of the recently deceased Polish businessman A. Gudzowaty).

After signing the memorandum Gazprom informed that the Yamal II could be ready in five to six years. According to the CEO Alexey Miller, the southern offshoot of the Yamal-Europe pipeline would have a capacity of over 15 bcm/year.

This volume equals the combined yearly consumption of gas in Hungary (~11 bcm/ year) and Slovakia (~6 bcm/ year), which are currently importing most of gas from Russia via Ukraine, through the Brotherhood pipeline.

According to the Miller’s comments Gazprom’s webpage “The gas pipeline route will run through Poland and our Polish partners will take an active part in engineering and construction works.”

In a boldly titled article, Russian press agency Itar-Tass announced that Warsaw would replace Kiev in assuring reliability of transit from Russia to Slovakia and Hungary under the Yamal-Europe II project.

Judging on reactions in Warsaw, Polish government is far from certain.

“I don’t know anything!”

The memo was signed two days after the Russian President recommended the construction of the new pipeline in a television interview.

On Wednesday, 3rd of April, Vladimir Putin said the new connection would “increase the reliability of supplies to Poland, Slovakia and Hungary.” Miller added that negotiations “at the corporate level” had already started and partners were “very strongly interested in cooperation.”

That day, Poland’s Minister of Treasury commented that Warsaw had already chosen a different model of gas market development, looking rather for more diversification: building the LNG terminal in Swinoujscie, connecting to transport systems of Germany, Czech Republic and Slovakia, and pursuing the exploration program, including the country’s hunt for shale gas.

"The project to build a new pipeline can be implemented only by the investor owned by the Polish state, which is a transit country," said Mikolaj Budzanowski.

Speaking on Wednesday evening, Minister Budzanowski added that the Yamal II would undermine Ukraine's position as a gas transit country and declared that both Ukraine and Poland should remain important transit countries.

On Friday, when “the very strong interest at the corporate level,” mentioned by Alexey Miller, changed into the signatures on the document sealed in St Petersburg, both Minister Budzanowski and the Prime Minister Tusk claimed they had not been informed on the subject.

“I can’t comment on something that I know nothing about” Tusk said, explaining he was unaware of the memorandum.

At the same time, the Prime Minister maintained the Wednesday's position on the initiative, presented by Minister Budzanowski. Tusk reiterated that Poland is not willing to participate in “political options.” 

“For us gas is not a political tool, and we would really like gas questions to be free of politics, according to European Union rules” the PM declared, adding – “In a strategic sense, we are not interested in a dramatic increase of gas imports from Russia.”

Asked why then EuRoPol Gaz signed a memorandum, Donald Tusk answered: “It’s not a Polish company.”

In explaining why he was not informed Budzanowski, who oversees the state-owned Polish gas company, said that the memorandum concerns only “analytical cooperation,” does not include any binding clauses and is just one of numerous corporate agreements.

Similar explanation was presented by the CEO of PGNiG. According to Grazyna Piotrowska-Oliwa, the Russian side has blown the agreement out of proportion

Finally, EuRoPol Gaz informed the agreement did not mean the investment will be carried out.

A more open position was taken by the deputy PM and Economy Minister Janusz Piechocinski. The leader of the junior coalition party PSL attended the summit in St. Petersburg, where he met with Gazprom CEO Alexey Miller.

Upon his retun to Warsaw, Piechocinski said that a detailed offer should be on the table within six months. “In half a year, when we know details of Russian plans, we will respond” – said the deputy PM from Poland.

Piechocinski avoided answering whether he was aware of the memo. Instead he called for declassifying of negotiation instructions he received for the talks with Gazprom's CEO Miller.

Who knows

According to one of advisors of the Poland’s president Bronislaw Komorowski, PGNiG representatives in the EuRoPol Gaz management are to blame for the “mistake.”

Miroslaw Dobrut, who signed a memo on behalf of EuRoPol Gaz has been a head of the Polish Chamber of Gas for years, and the president of EuRoPol Gaz since April 2010. Mr. Dobrut is also the PGNIG's deputy CEO.

In the interview published by the economy news website wnp.pl on Thursday 4th of April Miroslaw Dobrut said he was surprised by the Wednesday's declaration of Yamal II revival by Vladimir Putin.

On the other hand, as Natural Gas Europe reported last year, when PGNiG and Gazprom struck a deal significantly reducing prices of Russian gas for Poland, skeptics suggested that the agreement might be a part of a wider, behind the scenes accord, with some additional concessions made by the Polish side. One of the management board of PGNiG members was then quoted by Polish media as saying that both companies could re-launch negotiations on construction of the second leg of Yamal-Europe pipeline.

Memorandum and misunderstandings

The opposition parties asked the PM to provide explanations in the parliament and called for Budzanowski’s resignation over the matter.

Some critics strongly condemned the government and respective managers, speaking of “disgrace” of the first and “sabotage” of the latter.

“Who authorized signing?” – asked Marek Siwiec, who is forming the new political movement together with the former president Aleksander Kwasniewski – “For the first time, representatives of the Polish state signed the document contradicting the fundamental assumptions of Polish policy towards Ukraine, the Polish raison d'etat.”

According to the Jamestown Foundation, to become an effective tool of pressure on Kiev, the project does not need not be actually implemented. “It only needs to become a credible threat, which would however require Warsaw’s and Bratislava’s acquiescence, at least in the form of conducting serious discussions about this project with Moscow.”

On the other side, some politicians and commentators in Poland urged the government to carefully consider the project, arguing that Warsaw might negotiate proper transit fees and strengthen its position as a gas transit country.

However, some experts, such as Tomasz Chmal of Sobieski Institute in Poland and Michail Korchemkin, founder of East European Gas Analysis, reminded that Gazprom had been pursuing a program of building transit pipelines with available transmission capacities exceeding actual volumes of gas exports, which in turn might allow Russian company to switch to cheaper or politically more rewarding routes.

Korchemkin, quoted by the Kommersant Daily advised Poland to agree on Yamal II construction, under one condition: Gazprom pays regardless whether pipes are used or not.

Closed Corridor?

Some commentators are also rcommented that that just two weeks ago, Donald Tusk and Slovakian Prime Minister Robert Fico met to discuss construction of the first gas connection between these two countries. According to the Slovakian press, Robert Fico expects a feasibility study to be ready in June.

The Polish-Slovakian cross-border pipeline is to carry up to 10bcm of gas per year and become a part of the two-way North-South gas corridor connecting Polish LNG Gazoport in Swinoujscie and Croatian LNG import terminal on the Krk Island, creating a system of interconnections between five Eastern EU member states: Poland, Slovakia, Hungary, Czech Republic and Croatia.

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