The Russian Gas Distribution to Poland and Germany

The Russian Gas Distribution to Poland and Germany
Geopolitics of Natural Gas in Belarus

Circiu Alexandra
Facultatea de Relatii Economice Internationale
Specializarea: Comunicare de afaceri in limba engleza
Forma de invatamant: ZI
Anul de studiu: I
Grupa 1
Seria A
Introduction
Natural gas is rapidly gaining in geopolitical importance. Gas has grown from a marginal fuel consumed in regionally disconnected markets to a fuel that is transported across great distances for consumption in many different economic sectors. Increasingly, natural gas is the fuel of choice for consumers seeking its relatively low environmental impact, especially for electric power generation. As a result, world gas consumption is projected to more than double over the next three decades, rising from 23% to 28% of world total primary energy demand by 2030 and surpassing coal as the world’s number two energy source and potentially overtaking oil’s share in many large industrialized economies.
The growing importance of natural gas imports to modern economies will force new thinking about energy security. This study is meant to investigate the geopolitical consequences of a major shift to natural gas in world energy markets and to examine the interplay between economic and political factors in the development of natural gas resources; our aim is to shed light on the political challenges that may accompany a shift to a gas-fed world.
In the early 1990s the giant Soviet enterprise of Gazprom began work on a new project to export gas across Belarus to Poland and Germany. This was the first (and so far only) large new Russian gas pipeline project constructed after the dissolution of the CMEA system and the Soviet Union. This project remains the single largest expansion of gas transmission through Belarus. Whereas nearly all Russian gas exports to Western Europe traveled through Ukraine (and still do today), by the middle 1990s theft and risk of interruption of gas during Ukrainian transit had focused Russian minds on finding alternative routes. Finally, although this project was mainly conceived to serve the German market, it also was pursued partly with the aim of supplying the largely virgin gas market in Poland. This project is called the Belarus Connector (BC). In Gazprom’s vision, this project would have originated in the giant gas fields on the Yamal Peninsula and supply large volumes of gas to European markets.
Actual construction of the Belarus Connector began when the largest single user of gas in Germany (BASF) sought alternative supplies that would be less costly than those of state monopolist Ruhrgas. Gazprom welcomed this overture since it, too, sought to bypass Ruhrgas but for different reasons; it thought that alternative marketing arrangements could recover some of the rents that had traditionally gone to Ruhrgas by boosting the prices that Gazprom received for its exports. The German state played little positive role in making this project happen; it cautiously welcomed competition but stood ready to intervene if these new entrants caused too much harm to the well-connected incumbent Ruhrgas. The Polish state favored the project but contributed little as well; Poland remained wary of any scheme that would raise dependence on Russia, but at the same time gas figured in a vision for new cleaner electric power generation and the project would also help to tie Poland to Germany’s gas market. The practical effect of this relatively weak involvement of key governments was to raise the risk for commercial investors, slow the pace at which this project actually proceeded (in contrast with the earlier massive Soviet gas export projects), and favor elements of the Belarus Connector that could be brought online with relatively low risk and greater ease once an investor decided to allocate the capital. Thus the smallest and most scalable aspects of the project were pursued, while those that required the grandest visions and the largest capital expenditure languished.

Chapter I
Soviet Energy Strategy
1819 saw the first use of gas in Russia, for lamps on Aptekarsky Island in St. Petersburg. In Baku, where oil pipelines were first laid in 1872 as the city emerged at the epicenter of Russia’s largest oil producing region, annual natural gas consumption rose to 33 million cubic meters by the eve of the Russian Revolution in 1917 (Gazprom, 2004). The Soviet Union did not lay many long-distance gas pipelines until well after World War II—several decades after the appearance of the first long distance gas pipelines in the United States.
Through the 1970s gas remained predominantly for domestic use. International trade was minimal; in fact, the USSR was a slight net importer of gas (from Iran and Afghanistan). The first such pipeline—“Brotherhood”—began operation in 1968, linking the Shebelinka gas field east of Kiev to Czechoslovakia. A small extension linked that pipe to Austria, the first Soviet gas exports to the West; a small pipeline also served Poland.
The oil shock of 1973 changed this strategy. Higher oil prices put a premium on boosting production of gas to replace oil while also lifting the price that the Soviet Union could charge for the gas that it exported. Internal prices remained low, and thus the planning mechanism rather than price incentives were needed to direct gas resources to their most advantageous purposes. Planners took up the task by drawing long lines on maps—linking the west Siberian fields with demand centers in central Europe and in the west.
The gas projects that followed during the 1970s through the middle 1980s followed two basic scripts. Projects for CMEA nations involved the Soviet parent selling gas at depressed prices and through complex barter exchanges. Projects for western nations involved hard prices for the gas—usually indexed to the price of oil, which gas was replacing—and arrangements that typically involved concessionary hard currency loans secured with the proceeds of a long-term gas purchase agreement and usually a guarantee from the Soviet and Western governments. From the Western perspective they would give the Soviet Union a stake in the West and make it a less threatening country. At the same time, deals involving hard currency and western technology served the Soviet interest—not only was the currency useful, but western technology made possible the fuller development of west Siberian fields. The Soviet Union earned US$ 14.7 billion from gas and oil exports, or 62.3 percent of its total hard currency earnings. As shown in figure 6, from 1975 to 1980 both the volume and (oil-indexed) price of gas exports tripled, yielding a nine-fold increase in total earnings.
In the early 1980s the West German government, working through its gas monopoly Ruhrgas, launched negotiations to build new pipelines to carry Soviet gas to Europe. The new German projects would expand Russia’s export capacity, with two key differences. One was the new political climate; the other was the size of the projects—rather than tapping into the existing Russian gas production capacity, these new projects would include upstream investments to develop the giant Urengoi gas fields in Northwestern Siberia (see figure 5). In exchange for gas, German banks (backed by the German government) would supply capital; German firms would provide pipe and compressors. From the European perspective the U.S. objection was rooted in an imagined geopolitical threat; nonetheless, the risk of U.S. sanctions slowed the project and forced closer attention to constructing a deal that could be tolerated by the Reagan administration. The threat of delay or cancellation led the Soviets to develop their own (quite inferior) compressors, and when the pipeline eventually began operation in 1985 it deployed a combination of western and Soviet technology.
The sudden dissolution of the Soviet bloc had three effects that have altered the environment for Russian gas exports to the West. The first change was the disintegration of the CMEA bloc. Most Russian gas exports to the West traveled through
Czecholovakia, which soon broke into two distinct countries: the Czech Republic and Slovakia. Both these countries were in the midst of developing close ties with western Europe; if they had caused trouble for gas exporters then they would have harmed the interests of their new allies in the west whose consent was essential for membership in the EU and NATO. In fact, both countries saw their gas bills rise sharply as they were charged Western rather than CMEA discount prices. The Czech Republic quickly moved to the higher west European price as that country sought rapid integration with west European institutions. Slovakia’s internal gas prices remained lower for longer but then rose sharply in the first half of 2000 and today are at western levels. Both countries have reliably paid their increased bills. A second and more important change was the creation of politically distinct states within the Soviet Union itself. The European part of the Soviet Union formally disintegrated in 1992 into seven states—Russia, Belarus, Ukraine, Moldova and the three Baltic states. Thus instantly transit countries (Belarus and mainly Ukraine) appeared on the routes of all the pipeline projects connecting the European part of Russia to the outside world. Nearly all of the 60% jump in gas exports from 1990 to 1992 is the consequence of reclassifying internal Soviet transfers (pre 1992) as external trades (1992 and beyond), notably to Ukraine. At the time that the Soviet Union dissolved, about 90% of Russia’s gas exports traveled through Ukraine.
Third, the collapse of the Soviet Union caused economic shockwaves that dramatically lowered the internal demand for Russian gas. The Soviet economy shrank by about 40% and total energy consumption declined by about one-third (OECD, 1997). With a shrinking economy, gas consumption in Russia declined over 16%--from 420 bcm in 1990 to 350 bcm in 1997 (BP, 2003).

Chapter I
The Gas Distribution to Poland and Germany
The 1990s offered Russia both the possibility of exporting more gas to the West and the urgent need to earn additional hard currency. The Soviet Gas Ministry was reorganized into a joint stock company, with the assets divided among Belarus (1.5%), Ukraine (9.5%), and Russia (89%) each controlled by its respective government. The Russian state retains 38% ownership of the company, but through insiders the state has probably retained a controlling interest.
Natural gas producer prices are regulated at low levels. Gazprom sets the fees charged for transit on its pipeline network also at low levels (in the 1990s, about one-fifth the level in the West), and final prices to consumers are also regulated at low levels. In this system, control over the market flows not to the most efficient producers and marketers but to those who control physical access to the pipeline network. Low producer prices and uncertain access to pipelines prevented most independent producers from entering the market. Thus Russian gas production includes only miniscule quantities of associated gas, even though Russia’s oil industry is one of the world’s largest. To boost profits, Gazprom’s managers in the 1990s had a plethora of options in principle, but few were practical to implement. Gazprom could attempt to raise internal prices and improve collections, which would both lift revenues and “produce” gas by inducing conservation.
Gazprom could also improve collections from Russian and non Russian customers alike. In the middle 1990s only one-quarter of Gazprom customers actually fully paid their bills, and accumulated debts (including amounts owed by former Soviet republics) totaled $2.5b.
Gazprom could improve efficiency of its own operations and shed non-core assets. Its pipeline system was leaky and inefficient—an early 1990s study by the European Bank for Reconstruction and Development estimated that 15% of the pipeline throughput went just to operate the system, and improving the system could free 60bcm in production (see EBRD, 1995). But with low producer prices it actually didn’t make much sense for Gazprom to invest in its own efficiency. Projects such as replacing pipe that had been installed in the Soviet era with poor anti-corrosion coatings or installing more efficient western compressors would require capital (which was unavailable) and a long planning horizon (which did not characterize Gazprom’s management approach).

Table 1: Russia’s Major International Export Lines as of 2003. All these routes were constructed prior to 1990 except the Belarus Connector (a) and Blue Stream (g). Volumes shown are export potential attributed to each project. Data source: EIA, 2004b.

Chapter II
The Belarus Connector
The original plan was to build six 56” pipelines from the giant gas fields of Bovanenko (onshore) and Kharasevey (offshore) at the Yamal peninsula. These pipes would travel to Ukhta, where they would join the existing 56” pipelines that already traveled west from the Urengoi field north of Moscow. From there, two 56” pipelines would follow the existing “Northern Lights” route through Belarus where they would connect at Brest, allowing an expansion of Russia’s export potential along this route by about 67 bcm/yr. As the 1990s progressed the project kept being pushed into the future and the export potential reduced. Today, just one pipeline has been built along the final segments from Belarus to Poland and Germany; with a reduced number of compressors from the original plan, the export capacity at the Belarus border is only 20 bcm/yr. The table below shows the gas balances for the key countries involved in this project, along with Ukraine.

To understand the scaling back of this project requires looking at the demand for gas and the changing markets in Poland and, especially, Germany. During the brief period when Gazprom did not control export contracts the Russian giant found common interest with Wintershall—the largest independent oil and gas producer and marketer in Germany. Created originally as a mining company, BASF—Germany’s largest chemical producer—bought Wintershall in 1969 as part of its effort to gain control over its main oil and gas feedstocks. BASF and Gazprom shared their dislike of the monopoly position that Ruhrgas enjoyed and thus sought to break open the German gas market, creating three joint ventures—Wingas (a pipeline and wholesale marketing company) along with two companies—German-based Wintershall Erdgas Handelshaus GmbH (“WIEH”) and Swiss-based Wintershall Erdgas Handelshaus Zug AG (“WIEE”) that marketed gas in central Europe. Wintershall produces a small amount of its own gas that is accessible to the German market, but the only way to become a significant player in the German market was to secure its own imports, which required both pipelines and a foreign supplier.
BASF helped secure Gazprom’s role in Wintershall’s attempt to break open the regional fiefdoms and the Ruhrgas monopoly in gas transmission by agreeing in 1993 to build a huge ($500m) chemical complex in Western Siberia; in return, Gazprom pledged that WIE would hold exclusive marketing rights for the Yamal output—a decision that shocked the industry. By 1994 Gazprom and Wintershall had invested about $2.6b (in 1994 currencies) in the Wingas pipeline system and contracted 14 bcm of imports from Gazprom, of which only half was sold for the year 2000. It was implausible that Wintershall could sell perhaps another 50 bcm that would come to Germany and the rest of Western Europe if the full Yamal plan were realized.
Gazprom’s public infrastructure investment plans were simply unbelievable, but the much smaller volumes that Gazprom directed around Ruhrgas to its partner Wintershall were real. These joint ventures would allow Wintershall to sell directly to large customers (such as BASF itself) and to gas distributors. Costs for new pipelines were shared. he segments on Russian soil were built with traditional very large diameter Russian pipe and funded by Gazprom with loans from Russian banks and from Wintershall that would be repaid with gas revenues. Segments in other countries were developed by local affiliates in Belarus (Beltrangas) and Poland (EurPolGaz), with each relying on bank financing secured with portions of the transit revenues; the local firms repaid their part with transit fees and markups on the same gas. The German section was developed by Wingas, with financing from BASF via Wintershall.
Gazprom saw bypassing Ruhrgas as a way to get higher export prices (which benefited Gazprom directly) and to secure (through its joint venture with Wintershall) part of the wholesale markup that Ruhrgas had traditionally kept for itself. In the middle 1990s, for example, Ruhrgas paid about $2.70 per mmBTU for Russian gas, and average consumer prices approached $6 per mmBTU—Ruhrgas kept much of the difference for itself, which explains why Ruhrgas earned an extraordinary 25% after tax profit margin. Wintershall’s interests were slightly different—for it, Gazprom was a convenient initial supplier, but Wintershall eventually built pipelines and secured contracts with other key suppliers, and this divergence in interests explains why Gazprom’s strategy for circumventing Ruhrgas backfired badly. Gazprom probably achieved higher export volumes through its Wingas partnership with Wintershall, but Wingas secured user markets by cutting prices.
The Gazprom strategy through this period was exposed in a rare case where export contract prices and markups were released to the public in a pricing dispute involving the East German gas transmission company VNG. Created from the East German state gas ministry, VNG was crafted as a German joint stock company in 1990 and then privatized by Treuhand in 1991. At the time of privatization, VNG assumed the CMEA-era contracts for gas supplies, which made Gazprom its only supplier. Gazprom handed the task of renegotiating the main supply contracts to WIEH, and in 1994 the firm created new contracts with prices that were only slightly higher than existing arrangements—a huge disappointment for Gazprom, which had originally joined WIEH with the central goal of obtaining much higher margins.
The net effect of this competition between Wintershall and Ruhrgas was to drive down prices for distribution companies and for final consumers. As wholesale contracts between Ruhrgas and distributors expired, WIEH would attempt to entice the distributors with rebates, only to find that Ruhrgas would match the offers and in most cases win the contracts. Margins for Ruhrgas declined, and Wintershall struggled to gain market share. It is hard to assess whether Gazprom would have obtained different prices or volumes in the absence of its role in the Wintershall joint ventures. Our assessment is that Wintershall could have pursued its strategy with any large volume supplier—Gazprom was most convenient but hardly the only one. Throughout this process, Gazprom nonetheless sustained a close relationship with Ruhrgas as its largest customer; Ruhrgas bought the largest non-Russian share of Gazprom (nearly 6% today) and occupies the only non-Russian position on Gazprom’s eleven member board of directors (Gazprom, 2002).
Reflecting the interests of its two main advocates - Wintershall and Gazprom - construction began in the middle 1990s on the two opposite ends of the Belarus Connector. With resources on hand, Gazprom starting building the first (and so far only) export line on Russian territory without having lined up firm contracts for hardly any of the output—it built the line because it was part of a larger strategy to lift both volumes and prices while deploying little of its own capital. Through the middle 1990s gas exports accounted for about 15% of the total value of Russian exports. In the West, Wingas (with financial support from BASF) focused on building pipelines that led East but would be of immediate utility for Wintershall’s plan to attain 15% of the German gas market by 2000. Thus Wingas gave priority to scalable investments that could rapidly bring new supplies into its network while also bringing Wingas-controlled gas closer to big industrial customers and distributors. By that logic, Wingas opened the first pipeline in the Belarus Connector in 1996—a connection between Poland and Germany that allowed small quantities of gas to flow as WIEH lined up buyers.
Although the project began as part of a grand strategy in Germany, the market for gas in Poland gave additional impetus for building the project along the Belarus corridor rather than simply expanding the corridor that passed through Ukraine and Slovakia (i.e., the Transgas pipelines). Whereas the CMEA nations in Central and Southern Europe were all gasified by Soviet supplies, the role of gas in the Polish and East German economies remained much lower—indeed, that fact made the trans-Belarus route potentially attractive. In the early 1990s gas accounted for less than 10% of Poland’s primary energy (see the figure below). Displacement of the dominant coal supplies offered a potentially large market; the environmental consequences of coal-burning created an incentive for the Polish government (often with assistance from the West) to create space for gas.

The investment in Poland, like that in Germany, proceeded in a scalable fashion - capacity was adjusted as the market demanded. Even as Gazprom scaled back its export pipelines from two (a total capacity of 66 bcm) to one (for 33 bcm), achieving the full 33bcm 26required compression, and the original plan called for five large compressor stations in Poland. As the project developed, Polish demand did not grow as rapidly as expected, making it difficult to justify the expense of building all the compressor stations. Polish compressor stations were actually constructed in Włocławek and Kondratki; three more compressor stations—at Szamotuły, Ciechanów and Zambrów—so far have not been built owing to a dispute over financing rooted, fundamentally, in the financiers’ valid concern that the demand for gas in Poland and the lack of more success by WIEH in obtaining contracts in Germany could not justify additional capacity. The pipeline became operational with these three compressors in the year 2000 and at this time, its annual throughput amounts to 20 bcm.
All told, the Polish market has been disappointing for Gazprom. A forecast by the Polish Academy of Science (upon which the original plan for Poland’s offtake of the Belarus Connector was justified) predicted gas consumption in Poland would grow from about 10 billion cubic meters per year in 1993 to around 20 bcm per year by 2010. In reality, the total market has risen from 9.9 bcm in 1990 to just 11.4 bcm in 2001. The bottleneck is not supply but demand for gas. In electricity, new independently built power plants have had to compete with incumbent coalfired generators that have much lower costs. Gas prices indexed to oil, even when oil is inexpensive, make little sense for Poland’s coal-dominated power system. Just one of Poland’s two independent generators built during the 1990s is fired with gas (the other burns coal), and electric power modernization projects have focused on ways to improve the existing coal-fired fleet rather than replace them with gas. This experience is somewhat distinct from that of East Germany, where the industrial stock in 1990 was similarly coal-based, but the rapid integration with West Germany (along with huge infusions of German redevelopment cash) facilitated a much more rapid shift to gas.

Conclusions
For most of the countries involved in this project the general investment climate was terrible. Private investors had no way to secure investments in the gas sector; tariffs and transit fees were controlled by governments that often changed course and had no clear policy strategy. In the Soviet era such large infrastructure projects were controlled directly by the state, but neither the state nor state-controlled enterprises such as Gazprom had the capital on hand to make such strategic decisions. The general investment climate in Germany was more attractive, but in the gas sector the risks were enormous because the Belarus Connector was conceived as part of an effort to break the highly profitable German gas monopoly, Ruhrgas - thus the new entrant was trying to market gas in competition with a deep-pocketed, well-connected incumbent.
In this climate, the multibillion dollar vision for developing the Yamal field - even if the European Market could have absorbed such large quantities of gas - was not practical. Instead, the project proceeded in a manner that corresponded closely to each party’s narrow interests. Gazprom built what it could to export gas from existing fields and largely utilized the existing gas network, while attempting (albeit with an ill-conceived strategy) to boost profits by getting higher export prices. From Wintershall’s perspective, contracting with Gazprom made sense because it was the easiest source of new volumes that would be needed in their attempt to break open the market - a task that corresponded narrowly with BASF’s interest in low-cost gas and Wintershall’s interest in becoming a viable German gas company. This was not a climate for strategic long-term investments; the result, not surprisingly, was an export that was much smaller than Gazprom’s original vision, corresponded with each party’s narrow and relatively short term interests, and was highly scalable.
Regarding transit countries, studies reveal little evidence of deploying the “gas weapon” by Russia or transit countries. The main argument levied against the large Soviet era projects - especially by the Reagan administration in the period of tension after détente - was concern that Russia would use the gas weapon against the west. That never happened; rather, gas was priced - as in most other markets - by reference to oil. From October 1973 when the first gas crossed the Czech-German border until October 1992 when Ukraine interrupted supplies, the Soviet system never used the gas weapon. In the 1990s Russia (in the name of Gazprom) did cut off fellow CIS countries when they failed to pay their bills or siphoned extra gas during transit, but only as a final measure in long-standing disputes where Gazprom was arguably in a proper position to demand higher prices and payment.
The only time that the “weapon” of shutting off supplies has been applied has been by weak states that are bankrupt and beset by internal turmoil that makes it hard to pursue long-term strategies. In those cases, their actions have caused interruptions to users further down the pipeline, but that was not the goal. In contrast with the LNG imports to Japan, we find little evidence that countries have been willing to pay much of a premium to diversify their suppliers. There is some evidence that when major gas distributors diversified their sources in the 1990s they may have paid some suppliers more than the price at which Russia was willing to sell, but Russia’s strategy was to maximize volumes and the difference between Russian prices and landed gas in the same markets from other suppliers was not substantial. Poland depended heavily on Russian gas for its small gas market; it was willing to sign deals with alternative Norwegian suppliers at prices that were about 20% higher than those charged by Russia; in practice, though, none of those supplies have been delivered—rather, the threatened diversification mainly served imposed discipline on Russia as the low cost supplier. In Germany, interconnection with the rest of the western market made it easier to hedge against transit risks in the Russian supply, and premia for non-Russia supply were small or zero.
The Belarus Connector is often seen as an effort to move gas around Ukraine. In reality, the project made sense mainly on commercial terms for the markets it served—in particular, it was the most direct path on Wintershall’s effort to break open the German market. This was a project that incidentally avoided Ukraine; the projects conceived solely to bypass Ukraine were not credible. Nor has Belarus proved to be a reliable transit country. The Baltic Sea pipeline would avoid both these troublesome partners, but whether that is truly a viable option remains to be seen. If the Russian gas market were restructured so that Gazprom or some other entity could generate a credible plan for supplying a large export pipeline and both Belarus and Ukraine remained unreliable transit countries and the North European gas market was highly attractive for a pipeline exporter then the Baltic project will go ahead. So far, only the third of these conditions is rigorously satisfied, and even in that case the cost advantages of piped Russian gas are finding some competition in LNG and in the nascent gas-on-gas competition in the European market.
The traditional notion of “transit countries” is prone to oversimplification. The Ukraine case is one of a transit country that also had substantial gas storage facilities. Storage was crucial to Russia’s strategy for exporting gas from Urengoi and Yamburg and other technically complicated areas - poor construction and harsh environments made for unstable supply, but huge storage areas made it possible to assure deliveries and track seasonal loads. Ukraine was thus much more important than simply a transit nation, it also leveled supply.
Regarding risk in the quantities of gas sold, in both the German and Polish markets Gazprom and its partners badly over-estimated demand, but for different reasons in each market. In Germany, total demand for Gazprom gas rose slightly during the 1990s, but most of that was sold by Ruhrgas. Actual demand through the Wintershall/Wingas/WIEH arrangement (which Gazprom favored because it held the promise of higher prices) was much lower than anticipated because it proved difficult for the new entrant to create a market for itself, although Wingas now has 15% of the German market. It did force lower-end user prices (although probably did not much affect import prices, as they were set through the emerging gas-on-gas competition), but in most cases the contracted volumes stayed with Ruhrgas as the supplier. In Poland, gas volumes have fallen far short of expectations because the energy system was dominated by coal and there was no strong central direction to move away from coal, which was much less costly than imported gas. This experience contrasts sharply with the gasification of the Soviet Union, which moved rapidly once central planners gave the word.
Price risks were a regular feature of the European gas market and did not play a significant role in the outcome of this project. While Gazprom had thought it would get higher margins for export, both Gazprom and Wintershall would have gone ahead with the project if export prices were unchanged—for Gazprom, the goal was higher volumes and export earnings, and for Wintershall the goal was obtaining supplies outside the Ruhrgas monopoly. These risks were not appreciably different from those that gas exporters had borne in the European market. Traditionally, Soviet gas export contracts were intergovernmental agreements that set terms for volumes, with price formulae renegotiated every three years and indexed against oil. It is truethat during the 1990s this changed. New gas supplies (notably Troll) ushered in an era of gason-gas competition; exporters probably welcomed that era since oil prices collapsed at the sametime and it was less convenient to stick with traditional oil-based formulae. But those pricing risks were systematic and not unique to the Belarus Connector. Finally, each study in this book has explored the role of international institutions.
During the CMEA era, the CMEA itself played a substantial role in assuring transit of gas and in gasification of the CMEA members. When the Soviet thumb weakened and CMEA dissolved, gas projects required much closer attention to the narrow interests of a much large number of individual entities. The scaling back of the Belarus Connector from Gazprom’s original grand “Yamal-Europe” vision reflects that atomization of interests. The European nations had attempted to create a special framework for energy projects that could facilitate collective longterm infrastructure investments, known as the Energy Charter, but that institution figures nowhere in the history of the Belarus Connector. Progress towards Russia 's long-awaited ratification of the Energy Charter Treaty is determined to a large extent by the outcome of the negotiations on a Transit Protocol. However, the Energy Charter is aspirational in its attempt to create a context for investment, but it has no authority nor collective funds nor much influence inside its member states. The “international consortium” taking shape now in Ukraine may turn out to be an important international institution if it truly fosters collective investment and control of Ukraine’s vital gas transmission and storage infrastructure, but at present it is too early to make an assessment.

References 1. http://iis-db.stanford.edu/pubs/20603/Yamal_final.pdf 2. http://iis-db.stanford.edu/pubs/20191/wp8%2C_Protocol.pdf 3. http://iis-db.stanford.edu/pubs/20699/Gas_Exec_Sum.pdf

References: 1. http://iis-db.stanford.edu/pubs/20603/Yamal_final.pdf 2. http://iis-db.stanford.edu/pubs/20191/wp8%2C_Protocol.pdf 3. http://iis-db.stanford.edu/pubs/20699/Gas_Exec_Sum.pdf