The story of Poland's negotiations with Russia to extend its contract for the supply of natural gas is a long and complicated one, and has taken a number of unexpected turns. The two countries have been banging heads over the deal since early 2009, when a Ukrainian company pulled out of its gas-delivery agreement with Poland, leaving a supply gap of some two billion cubic meters.
Obstacles to the agreement included Gazprom's debt and the shareholder structure of EuRoPol GAZ, the company that manages the Yamal pipeline in Poland.
Finally, a deal was agreed upon in January. The deal increased the amount of gas Russia supplied to Poland by some three billion cubic meters annually and was widely expected to be signed relatively quickly.
However, in February, the European Commission got involved, asking for details of the agreement. It objected to the way the deal was structured, insisting that the pipelines transporting the gas through Poland be accessible by third parties, and that the pipeline itself be run by an independent entity. Given that the countries want to maintain shared control of the pipeline, those are conditions that Poland and Russia seem unwilling to provide. According to an article in Sunday's New York Times, the EC is now stepping up its opposition to the deal.
The consequences could be significant. A stoppage of gas deliveries from Russia – currently set to occur on October 20 – would cause tremendous controversy and ratchet up animosity on both sides. Polish businesses would see an immediate reduction of their gas supplies, according to PGNiG, Poland's state-owned gas monopolist. And the longer the impasse lasts, the closer Poland would get to reducing gas supplies to private homes during a winter that is expected to be extremely severe. The Russians would see the row as more evidence that the Polish side's recent friendliness was disingenuous.
So then why the intervention from the EC? It seems counter-intuitive to think that the European Commission, generally dovish on European-Russian relations, would go so far as to potentially ruin the recent warming of relations between Poland and Russia. European independence from Russian supplies has not exactly been the EC's top priority – it has put up zero opposition to the unwise construction of the Nord Stream pipeline, which would pump Russian gas straight into Germany across the Baltic without transiting any other EU countries.
The answer seems to be friction within the Polish government. The negotiations with Russia are being led by Waldemar Pawlak, Poland's deputy prime minister and economy minister, who desperately needs a win after a poor showing in this summer's presidential elections.
On the other side is Poland's Minister of Foreign Affairs, Radosław Sikorski, known for his suspicion of the Kremlin. In March the Ministry of Foreign Affairs gave a negative evaluation of the Poland-Russia gas deal, riling Mr Pawlak. The New York Times article suggests that the Foreign Ministry has pushed hard for the EC's intervention.
Under the terms of the current deal, Poland's gas supply would be locked up by Russia until 2037 – or at least until 2022 under some compromises that have been mooted. That would make investment in Poland's LNG terminal in Świnoujście, or in shale gas deposits, almost a waste of time. In turn, Poland would be dependent on Russian supplies – just the opposite of what Poland has been working for over the past few years.
How will this be resolved? We'll have to wait and see to get the answer to that question. But it doesn't look like this deal is getting done anytime soon. The two governments could blame the EC to avoid a public relations' nightmare, but it looks like the battle between Poland's Foreign Ministry and Economy Ministry is due to heat up. If the October 20 deadline passes without any deal, look for these two elements of PM Donald Tusk's government to make their battle more public.
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