EAEU’s common gas market will benefit both Belarus and Armenia: interview

The Eurasian Economic Commission’s Oil and Gas Committee has approved the project to create a common Eurasian Economic Union gas market. What does this mean for the members of the Union, where only Russia and Kazakhstan produce gas? How strongly do the economies of Armenia, Belarus and Kyrgyzstan depend on gas imports and will the common gas market offer them lower prices? EADaily’s correspondent has asked these and other questions to Igor Yushkov, senior analyst at the National Energy Security Fund and expert at the Russian Government’s Financial University.

What will the Eurasian Economic Union’s common gas market give to the Union’s members considering the fact that only two of them produce gas?

Yes, only Russia and Kazakhstan export gas, while the other members import it. Consequently, this project is not very good for Russia as it stipulates unified tariffs and free flows within the Union. For the moment, gas prices in Belarus and Armenia are higher than in Russia. So, this project is good mostly for the importers - Belarus, Armenia and Kyrgyzstan. But since this is part of the general integration concept, the Russian authorities are ready to run this risk.

Kazakhstan may also get certain benefits here – by exporting more gas to China and importing more gas from Russia for own needs. This will not be good for Russia as Gazprom is also negotiating to export gas to China.

Will this project result in lower gas prices for gas importers?

The most probable scenario is lower prices for Armenia and Belarus. The other scenario would be higher prices in Russia and Kazakhstan. But that would cause public displeasure in those countries.

The key benefit for the importers will be high rivalry among suppliers. The common gas market implies free transit within the Union, which means that Belarus or Armenia will be able to buy gas from Kazakhstan and Russia will be obliged to provide its territory for its transit.

How strongly do the union members depend on Russian gas?

In fact, Armenia and Belarus get all of their gas from Russia. In 2016, Armenia imported 1.864bn c m from Russia (against only 367mn c m from Iran in exchange for electricity), while Belarus imported as much as 18.640bn c m. Kyrgyzstan gets Uzbek gas but that gas is supplied by Gazprom. Today, that country consumers just 300mln c m but Gazprom hopes to supply more as recently it bought the local gas network.

What can prevent the sides from carrying out this project?

I have already said that one of the problems may be if Kazakhstan decides to export more own gas to China and to import more Russian gas for own needs. So, the sides will have to come to terms so as to prevent any abuse of interests. One more problem is that the member states have different gas market regulations. In Belarus, there is monopoly, with the gas tariffs fixed by the state. In Russia, the gas tariffs are also fixed by the state but there is also a gas exchange and harsh rivalry among Gazprom, Rosneft and Novatek though only Gazprom is authorized to export gas by means of pipelines. So, the question here is, once the common gas market is formed, will the supplies from Russia to Belarus or Armenia be qualified as export or not. All this has to be negotiated.

Will this project make it easier for Armenia to cope with the energy blockade imposed by Turkey and Azerbaijan?

For Armenia, it is important to remain parent with Russia and Georgia as the latter is the only transit route for Russian gas supplies to Armenia. One more important question is the price. Naturally, it will be better for Armenia if the common tariffs are lower than the tariffs it pays today.

What an effect may the common gas market have on the project to create the North-South energy corridor (Iran-Armenia-Georgia-Russia)?

I don’t much understand the sense of this project. Iran is Russia’s rival on the gas market. Yes, Armenia and Georgia may be interested in getting gas from Iran but only if it is cheaper than Russian gas. And this is hardly possible. The Iranians are already having problems with some of their consumers. They don’t want to sell their gas cheap as they need money for enlarging their gas network (today, they are forced to buy gas from Turkmenistan so as to be able to give gas to their northeastern provinces), developing their fields and effectively fighting in Syria and Yemen.

Interviewed by Arshaluys Mgdesyan