Putin, Miller Unveil Pipeline Project to Bypass Ukraine via Poland

2013/04/08
By: Vladimir Socor
Gazprom CEO Alexei Miller and Russian President Vladimir Putin (Source: kremlin.ru)

On April 3, in Moscow, President Vladimir Putin and Gazprom CEO Alexei Miller announced a colossal series of gas projects. These involve an expansion of existing big projects or a reactivation of earlier, unimplemented proposals. Ukraine’s start of gas imports from Europe, reducing dependence on Gazprom (see EDM, April 1), triggered this Putin-Miller move.  In a set-piece dialogue, they outlined these intentions (Russian presidential website www.kremlin.ru, Interfax, April 3, 4):

•    Reviving the Shtokman extraction project in the Russian Arctic (no specifics mentioned).

•    Adding a third parallel line to the Nord Stream pipeline on the Baltic seabed to Western Europe, and prolonging that third line to supply the Netherlands and Britain with Russian gas. This would boost Nord Stream’s capacity from the existing 55 billion cubic meters (bcm) to more than 80 bcm per year.

•    Designing the South Stream pipeline for its originally proposed capacity of 63 bcm per year, with four parallel lines on the seabed of the Black Sea en route to Europe. This seems to imply reinstating South Stream’s southwestern branch toward Italy, which Moscow had dropped in 2011 from the initial project, instead prioritizing the northwestern branch to Central Europe.

•    Building a new pipeline from Belarus via Polish territory to Slovakia—the long-proposed Kobryn (Belarus)-Poland-Velke Kapusany (Slovakia) line—to connect Russia with Central Europe. This line would plug into Slovakia’s gas corridor.

The Slovakian corridor carries the lion’s share of Russian gas supplies to the European Union, representing the direct continuation of Ukraine’s transit pipelines to Europe. The proposed Kobryn-Velke Kapusany line would circumvent Ukraine, but would not affect Slovakia, inasmuch as the same gas volume would enter Slovakia from Poland, instead of entering from Ukraine. The export destinations (Austria with the Baumgarten distribution center, Czech Republic, Germany, Hungary, Italy) would not be affected either.

Compared with the Nord Stream and South Stream mega-projects, a Kobryn-Velke Kapusany pipeline with its proposed 15-bcm annual capacity looks almost restrained. But, if built, it could deal a coup de grace to Ukraine’s gas transit system, which is already facing the South Stream bypass threat. A Kobryn-Velke Kapusany line would not add any new volumes of Russian gas to Europe. The operative goal of this project is to increase Russian pressure on Ukraine to cede control over its transit pipelines to Gazprom.
To achieve that operative purpose, the Kobryn-Velke Kapusany project 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. Apparently, the Kremlin and Gazprom hope that the European Union member countries Poland and Slovakia might assist Russia’s efforts to obtain control over Ukraine’s transit pipelines under compounded pressures. According to Putin and Miller in their joint appearance, Gazprom has recently held talks with Polish and Slovakian companies, which allegedly expressed “very strong interest” in the implementation of the Kobryn-Poland-Velke Kapusany pipeline (Russian presidential website www.kremlin.ru, Interfax, April 3, 4).

According to Putin and Miller, this line could be built and become operational by 2018–2019, after South Stream will have been built by 2017. Stipulating such deadlines (without a discussion of resources for the South Stream project) is designed to scare Ukraine into submission. Russia would not need to come up with new gas volumes, but merely to re-route existing export volumes into a Polish transit pipeline, before they reach Ukraine’s transit system.

Kobryn, in the southwestern corner of Belarus on the Polish border, is the exit point of the Beltranshaz trunk pipeline connecting with Poland’s pipeline grid. Gazprom’s proposal, under discussion since the late 1990s, envisages building a 600-kilometer pipeline from Kobryn, via eastern Poland, to Velke Kapusany in easternmost Slovakia, the entry point of the main transit pipeline from Ukraine en route to Central Europe.  Under the latest, Putin-Miller proposal, Gazprom would divert 15 bcm per year from Ukraine’s transit pipelines into the Kobryn-Velke Kapusany route. Whether the re-routing of this volume would still allow sufficient capacity for Russian gas supply to Belarus itself through the Beltranshaz pipeline is not entirely clear. Russia normally supplies Belarus with approximately 20 bcm of gas annually for Belarus’s own consumption. Another 2.5 bcm per year of Russian gas is delivered through a Beltranshaz line to Lithuania and onward to Russia’s Kaliningrad exclave.

Gazprom has completed in 2011 a phased takeover of Beltranshaz under Gazprom’s full ownership, achieving an integrated gas transportation system on Belarus’s territory. This is partly intended as an overture to a phased takeover of Ukraine’s gas transit system. Meanwhile, it is obviously more profitable for Gazprom to use its own transit pipeline on Belarus’s territory, rather than pay transit fees for using Ukrainian transit pipelines.

Separately from Beltranshaz, Gazprom owns and operates the Yamal-Europe One transit pipeline, with a capacity of 30 bcm per year, running across northern Belarus into Poland and onward to Germany. The Yamal-Europe One pipeline is fully dedicated to supplying Poland and Germany with Russian gas. Russia (and, at times, Poland) intermittently discussed building a Yamal-Europe Two pipeline, parallel to Yamal-Europe One, toward Poland and possibly Germany. The construction of Nord Stream on the Baltic seabed, bypassing the mainland, has rendered that version of Yamal-Europe Two moot. Moscow, however, now proposes the name Yamal-Europe Two for the Beltranshaz trunk pipeline that would carry Russian gas from a junction point within Belarus to Kobryn and the exit to Poland.

Poland has no need for this pipeline, no reason to cooperate with this Russian project, and no grounds for compounding the pressure on Ukraine. However, Slovakia is a vulnerable target of Gazprom. Like Ukraine, Slovakia is fearful of losing transit volumes in the event that Russia builds South Stream. In that case, the same westbound gas volumes that would be shifted from Ukraine’s transit pipelines could ipso facto be shifted from Slovakia’s transit pipelines, these being a direct westward continuation of Ukraine’s pipelines.

Moscow, however, now seems to offer to maintain the gas transit volumes through Slovakia, re-directing them via Poland, instead of Ukraine, into the Slovakian pipeline system. Russia’s move seeks to isolate Ukraine while incentivizing a separate Slovak deal with Gazprom. The South Stream project is designed to scare Slovakia almost as much as Ukraine. The pressure on Slovakia is not so obvious because Russia refrains from advertising it publicly, whereas it heavily publicizes its pressures on Ukraine.

Back in 2000–2002, Russia insistently discussed the Kobryn-Poland-Velke Kapusany project with Belarus, Poland and the European Union, in an early effort to circumvent Ukraine’s transit system (Kommission der Europaeischen Gemeinschaften, Energie-Dialog mit Russland, April 2003). In 2002, Ukraine ostensibly agreed (without seriously intending to deliver) to share its transit system with Gazprom in a “consortium,” possibly with minority German participation. After this, Moscow de-emphasized the Kobryn-Poland-Velke Kapusany project because it counted on using the Ukrainian system under Gazprom’s control. This story may recur, albeit to a full denouement this time, if Ukraine yields to Russian pressure. In that case, the unaffordable South Stream and the more bankable Kobryn-Poland-Velke Kapusany project would become redundant.

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