August 2017

Polish-Russian energy relations following the aggression against Ukraine – part 1

Energy security, in particular supplies of natural gas and oil, has long been a focal point of Poland’s energy policy. The main reason for this is Russia’s dominant position as a supplier of these energy carriers. Russian supplies of crude oil are usually in excess of 90% of total imports and the share of natural gas has reached nearly 70%. Historical (east-west transmission network largely inherited from the days of the Soviet hegemony in the region), geographical (relative proximity of Siberian fields) and economic (relatively low prices, although this factor has recently lost its significance) factors have contributed to bring about such a high level of Polish dependency on Russian energy carriers. Polish elites and the Polish public have become increasingly concerned over repeated instances of Russian abuse of its position as the dominant supplier in order to exert economic and political pressure on customers over the last dozen years or so. Evolution of the political system in Russia as well as its growing assertiveness (to put it mildly) in terms of foreign policy have clearly affected Poland’s assessment of the situation. The gas crises which occurred in 2006 and 2009 on differing scales illustrated that Poland and other Central European states could easily become hostages to conflicts in the post-Soviet space. This problem has also been noted by other EU member states which has resulted in the adoption of several political strategies and legal acts by the European Union aimed at improving the security of supplies. Poland has actively participated in these actions since 2006. It has underlined the need to reach a balance between three pillars of EU energy policy: competitiveness, sustainable development, and security of supply.

Polish policy has focused on gas. Greater, almost complete, dependence on Russian oil has not been a sticking point since Poland has the technical means by which to obtain oil from other sources thanks to the Gdansk terminal and its access to the well-functioning global oil market. Hypothetical problems with the Druzhba oil pipeline would obviously have financial implications but only limited political and strategic costs. Speaking of gas supplied via dedicated infrastructure, possible disruptions of supply would have had more serious economic and subsequently political consequences given the merely developing (albeit rapidly) global LNG market and the lack of access to other sources of gas supply. Hence, Polish governments have striven to diversify sources of gas supply and expand regional connections within the EU for over a decade in order to enhance physical and contractual security (by purchasing Russian gas from EU intermediaries). The launch of the initially virtual, and later physical, reverse of the Yamal-Europe gas pipeline constituted an important step forward. Still, it was the launch of the terminal for liquefied natural gas (LNG) which played a more decisive role. It took more than 10 years to implement the strategy but the LNG terminal in Świnoujście with a storage capacity of 5 billion m3 (with the possibility of expansion up to 7.5 billion m3) was opened in late 2015. The first deliveries under the long-term contract with Qatargas arrived in 2016. The first LNG carrier transporting American gas arrived at the terminal in the spring of 2017. This was a result of a short-term transaction meant to test new capacities. Therefore, Poland is gradually achieving its goal of creating a diversified supply portfolio which ensures that the level of Polish demand for Russian gas supplies will be determined by market conditions and not only by the whims of the monopolist. Russian policy over the course of the last three years has only served to confirm the urgent necessity to reduce the risk of over-dependence on Russian gas. There are voices in Poland stating that the optimal goal of energy policy is to reach sufficient capacity in order to eliminate the need for Russian gas. This goal is set to be achieved within the next couple of years, preferably before the long-term contract expires in 2022. Since 2014, other proposals have also been set out by Polish governments with this aim in mind. 

 Author: Ernest Wyciszkiewicz

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