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Belarus as a gas transit country

IPM Research Center
The current paper aims to identify the long-term economic interests of Belarus and Russia (Beltransgaz and Gazprom) in transiting Russian gas, and to see whether they are different or can be combined.European countries are the main consumer of Russian gas, 20% of which is delivered through Belarus. Future developments of the EU markets such as increased competition among gas-importing countries force Russia to diversify gas supply to Europe in order to minimize its supply cost. Hence, providing effective pipeline operations is also of crucial importance for transit countries such as Belarus in order to attract (and to benefit from) sufficient transit volumes. To consider this, we model the two main markets for natural gas, the European Union (EU15) and Central and Eastern Europe (CEE), three gas-exporting countries (Algeria, Norway and Russia) and two transit routes for Russian gas, Ukraine and Belarus. Using this model we simulate expected developments on the EU gas market and project their consequences for export and transit countries. Based on estimations it appears that both Belarus and Russia benefit from joint cooperation. This result is driven by the lower cost of gas transit through Belarus as compared to Ukraine. Thus, as long as Belarus keeps transit fees on their current competitive levels, the Russian side has an incentive to transit as much gas as possible through Belarus, which in turn is able to sustain its current profits. Furthermore, extending Belarus’ transit capacity again benefits both countries: Belarus because of higher profits as transit volumes increase, and Russia because it can transport more gas at low Belarusian costs to EU markets (and thus, less gas at higher costs through Ukraine). Therefore, joint cooperation in gas transit satisfies the interests of both countries, and additional investments in transit capacity are in the interest of both countries. Therefore, Belarus should seek to create conditions conducive for such investments by demonstrating its reliability as gas transit country. Finally, intensified cooperation with Russia that suits both countries’ interests would also reduce the risk for Belarus to suffer from interrupted energy supplies as it happened recently.
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Contributor: IPM Research Center - http://research.by/eng/
Topic: Economy and Development
Country: Belarus
Document Type: Economic Analyses and Commentaries
Year: 2004
Keywords: Energy Policy, Energy Trade
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