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Poland, Belarus & Ukraine Report: December 2, 2003

2 December 2003, Volume 5, Number 45
WHICH WAY WILL OIL FLOW THROUGH ODESA-BRODY PIPELINE? On 26 November, the Ukrainian cabinet somewhat unexpectedly approved an agreement on "integrating" the Odesa-Brody oil pipeline with the Polish pipeline network. Two days later, in Brussels, Polish Deputy Prime Minister Marek Pol and Ukrainian Deputy Prime Minister Vitaliy Hayduk signed an agreement on a linkup of the Polish and Ukrainian oil-transport systems.

Yet Ukraine's commitment to the linkup is not unequivocal. When announcing the cabinet's decision to the media, Ukrainian Foreign Minister Kostyantyn Hryshchenko called the agreement "an intergovernmental document...of principal importance for integrating the Ukrainian system with that of Europe." He added, however, that a separate agreement will be needed on whether the pipeline will actually be used to pump oil to Poland or whether it will be engineered in the reverse direction, to shift Russian oil (received via Belarus) to Odesa, and then onwards by sea.

When the pipeline plan was first conceived in the 1990s, there was no doubt about how it would be used. Oil from the Caspian basin and Central Asia would be shipped across the Black Sea to the new Odesa oil terminal, and then go by pipeline to Brody, and then on via Poland (with links to the Plock refinery and Gdansk) to Western and Northern Europe. The route would not only earn transit fees for Ukraine, but would also comply with Turkey's commitment to stopping tanker transit through the Dardanelles. However, although the pipeline was duly built, plans for its use ran into difficulties. Poland was unable to raise the cash to construct the necessary linkups, and no Western oil company came forward with a firm offer to purchase oil conveyed by this route. In the meantime, the Russians came up with their own plan to reverse the direction of flow.

Both in Ukraine and abroad, the choice was seen as far more than a purely economic one: it became a symbol of Ukraine's choice of future -- with "Europe" or with Russia.

"The Odessa-Brody scenario is like plagiarism of the drama of the [Single Economic Space] SES," wrote the "Ukrayinska pravda" website on 3 October 2003. "There are the pro-European 'goodies' who advocate using the pipeline to transport Caspian oil to the West, although there is not a single contract to guarantee this direction. And there are the pro-Russian 'baddies' who advocate using the pipeline for the needs of the northern neighbor [i.e. Russia] that promises Ukraine immediate economic benefits. The value for Ukraine is either rubles today, or the unique role of an alternative to Russia tomorrow or the day after."

Likewise, on 8 October, during the visit of Ukrainian Prime Minister Viktor Yanukovych to Washington, U.S. Vice President Richard Cheney pressed him on what Ukraine intends to do with the Odesa-Brody pipeline. The U.S. government has always supported the idea of the westward pipeline, as a way of preventing a Russian stranglehold on Central Asian and Caspian oil. But at the time of the Yanukovych-Cheney meeting, the issue was particularly topical: that same day was Ukraine's deadline on an offer from the Russian oil company TNK-BP (formed by Russia's Tyumen Oil Company and British Petroleum), which had offered a deal of 9 million tons of oil to be transported annually for a fee variously reported as $60 million and $90 million. Yanukovych's reply was somewhat unequivocal: he "as a state official" had "never doubted the western direction of the pipeline," but it was now up to the Western oil companies to go "from statements to actions" with a specific offer.

At the same time, a power struggle had developed within the Ukrtransnafta oil-transport company, between its "pro-Russian" Executive Director Stanislav Vasylenko and its "pro-European" President Oleksandr Todiychuk. Over the late summer and early autumn, the latter had been canvassing support for the original western direction of flow, and after negotiations in Brussels in September, he told a BBC interviewer that he had found "potential" European buyers for 6 million tons of oil. He also outlined strategies to use the pipeline in advance of the Polish linkup, to supply oil to Slovakia, the Czech Republic, and Germany, using rail transport onwards from Brody.

A few days before the 8 October deadline, Vasylenko appeared to have won: the Ukrainian media had reported that Ukrtransnafta had accepted the Russians' offer. But Fuel and Energy Minister Serhiy Yermilov denied this: the decision, he said, was one of "strategic importance," which only the government could make. Vasylenko countered by threatening that Ukraine stood to lose $200 million if the Russian offer was rejected, adding that Ukrtransnafta needed the money to refurbish its existing obsolescent pipes, which now posed an environmental danger.

However, any Ukrainian government decision now appeared to be on hold until the results of a feasibility study on the reverse use of the pipe: various news agencies quoted Yermilov as saying that a decision could be expected "in late December or early January" (ITAR-TASS) or "by 15 January" (UNIAN). Shortly after this statement, Loyola de Palacio, the European Community vice president with responsibility for transport and energy, postponed a scheduled visit to Kyiv, which was expected to focus on prospects for extending the pipeline to Plock. Although the official reason for the postponement was de Palacio's "busy schedule," Todiychuk attributed it to de Palacio's "disappointment at recent events in Ukraine" and to the "ongoing active discussion...of the possibility of reversing the direction of flow."

A "feasibility study" is often a means of buying time. It did not, however, stop debate and speculation in and outside Ukraine. An interview by the new U.S. ambassador to Ukraine, John Herbst, (carried by the "Zerkalo nedeli" website) and some "off-the-record" remarks by a U.S. Embassy official were interpreted by the media into a supposed commitment by Chevron to purchase oil delivered to Brody via the pipeline.(The U.S. Embassy subsequently put out a denial but belief in the commitment continued to circulate in Ukraine.) In Kazakhstan, which is keen to use the pipeline to transport its oil to Europe), Foreign Minister Qasymzhomart Toqaev and President Nursultan Nazarbaev stressed that the Odesa-Brody pipeline and its extension to the Polish port of Gdansk is a top priority in Kazakh-Ukrainian relations. And at the EU-Ukraine summit in late October, the issue of the pipeline was raised again, with the EU delegates warning against "reverse flow."

Then, in the last days of November, several weeks before the expected announcement on the feasibility study, the Ukrainian government acted. The timing may have been fortuitous (international agreements, even ones that have long been discussed, cannot be drawn up overnight). However, recent events must have strengthened the hand of those favoring the "Western" option. The current investigation into Russia's Yukos oil company has put a question mark to the future of all other Russian oil companies (see "RFE/RL Organized Crime and Terrorism Watch," 3 November 2003). The nationwide commemoration on 22 November of the Ukrainian victims of the "artificial famine" of 1933 (deliberately created by Stalin to subdue Ukrainian resistance to the Soviet system) inevitably stirred old fears of Russia. And the "Rose Revolution" in Georgia evoked pointed suggestions from Ukrainian opposition activists that President Leonid Kuchma should follow the example of Eduard Shevardnadze and resign his presidency early. All factors that made the decision on the pipeline enhance the "Western-looking" image of the Ukrainian government, while still leaving their ultimate option open.

This report was written by Vera Rich, a London-based freelance researcher.

NEW HIGH-LEVEL SCANDAL HITS RULING PARTY. On 29 November Poland's three dailies, "Gazeta Wyborcza," "Rzeczpospolita," and "Zycie Warszawy," reported that prosecutors in Gdansk have been investigating since August whether Jerzy Jaskiernia, head of the ruling Democratic Left Alliance (SLD) parliamentary caucus, took a $10 million bribe from lobbyists to influence passing favorable amendments to a gambling law in parliament. According to the reports, some firms registered in tax havens succeeded in reducing the tax they pay for slot machines (popularly called "one-handed bandits") from a planned 200 euros ($240) a month to 50 euros. "Gazeta Wyborcza" reported that Jaskiernia had been advocating amendments to the gambling law for years and that his assistant, Maciej Skorka, had "thousands" of slot machines installed in Poland. Jaskiernia denied any wrongdoing. "This is complete nonsense," he said.

The amendments to the gambling law were passed in April. A draft bill presented by the government set the monthly fee for one slot machine at 200 euros, but according to the above-mentioned press reports, SLD lawmaker Anita Blochowiak proposed that the fee be reduced to 50 euros in 2003 and increased by 25 euro in each successive year until the maximum amount of 125 euros. According to the government, the legislation was needed to persuade the owners of Poland's 40,000 slot machines to come out of the shadow economy and contribute to the budget.

The scandal also involves Andrzej Barcikowski, head of the Internal Security Agency, who last week presented a secret report to the Sejm on lobbying in connection with important government-organized tenders and contracts. Barcikowski reportedly warned lawmakers that some newspapers, influenced by lobbyists, "conduct campaigns of disinformation" linked to major contracts in Poland. Barcikowski's report "is a sort of counter bomb. Since media publish materials about big [corruption] scandals, it is necessary to suggest that these materials, too, result from pressure and backstage actions," the "Gazeta Wyborcza" website quoted lawmaker Jaroslaw Kaczynski, leader of the opposition Law and Justice party, as saying. "It looked like an attempt at discrediting investigative journalism texts that have not yet appeared," "Rzeczpospolita" on 26 November quoted another lawmaker as saying on condition of anonymity.

"This Sejm has lost its legitimacy for action," Jaroslaw Kaczynski commented on the gambling-bill scandal, calling on the parliament to disband itself. His call has been immediately supported by the opposition League of Polish Families and Self-Defense. The opposition Civic Platform is less enthusiastic about the self-dissolution idea. Civic Platform leader Jan Rokita said the proposal is a "propaganda move" with no chance of success. Self-dissolution of the Sejm, according to the constitution, needs to be supported by at least 300 lawmakers (two-thirds of their statutory number of 450), while the opposition is not able to muster even half of the Sejm votes.

Sejm speaker Marek Borowski called the opposition motion urging the Sejm to self-dissolve "totally irresponsible," arguing that the parliament still needs to pass dozens of bills to prepare Poland for EU membership by 1 May 2004. If these bills are not adopted, Borowski stressed, Poland could lose money from EU funds. Borowski promised that the Sejm will urgently publish a "white paper" detailing parliamentary work on the gaming legislation.

The bribery allegations in connection with the gambling legislation are the latest news in a long series of sleaze scandals involving current and former SLD officials from the Health, Defense, Interior, and Culture ministries.

Prosecutors and a special parliamentary commission are still investigating the allegations that film producer Lew Rywin solicited a $17.5 million bribe on behalf of the SLD for lobbying a media law. The Rywin scandal involves, among other officials, former Deputy Culture Minister Aleksandra Jakubowska.

Former Health Minister Mariusz Lapinski, according to a recent report prepared by the Health Ministry, may be guilty of corruption connected with the introduction and sale of pharmaceuticals in Poland.

Deputy Interior Minister Zbigniew Sobotka was forced to resign and give up his parliamentary immunity over allegations that he warned local government of a pending police raid on local organized-crime structures, after receiving the information about the raid from police chief Antoni Kowalczyk. Kowalczyk was also sacked.

Last month "Zycie Warszawy" reported that many tenders for purchasing equipment for the Polish Army in 2002 and 2003, including gear for the Polish contingent in Iraq, were dishonest. According to the daily, conditions for a tender were set so as to suit only one specific firm, which paid a bribe after winning it. Some 30 people have reportedly been arrested on charges of involvement.

All these corruption scandals have considerably contributed to pushing the SLD-led government's current ratings below 20 percent from the 41 percent with which the party won the 2001 general election. Last month a poll by the OBOP polling agency found that the SLD, with backing of 18 percent, has lost its popular lead for the first time since 1999. The centrist, liberal Civic Platform, supported by 20 percent of voters, is Poland's most popular party now. Civic Platform leaders Donald Tusk and Jan Rokita are more and more certain that their party can win a parliamentary election in 2005 and form a government with the right-wing Law and Justice. (Jan Maksymiuk)

MOSCOW ACCUSES MINSK OF GRABBING TRANSIT SHIPMENTS. Russian Ambassador to Belarus Aleksandr Blokhin told a 26 November seminar for Russian and Belarusian journalists on the two countries' integration that the behavior of Belarus's customs services damages both Russian businesses and the Belarusian economy, Belapan reported. "We cannot but feel concerned over the trends that have been escalating lately at Belarus's customs checkpoints," Blokhin said. "I mean the large-scale campaign of confiscating shipments in transit to Russia. Often, as far as we know, goods are confiscated on insignificant and formal grounds for unintentional or even questionable irregularities."

Blokhin said that some 70 percent of all seized shipments are confiscated on the ground of their being an "ownerless cargo." "It is absolutely unclear why the Belarusian customs concludes that a cargo is ownerless," Blokhin briefed journalists. "The reason usually given in such cases is that the Russian company [that owes this cargo] was formed illegally. This is not Belarus's affair at all, and it bears no relation whatsoever to transit through Belarus. If Belarus's appropriate agencies have information that a Russian company, as they believe, operates illegally on the territory of the Russian Federation, then there are ways in existence in international practice to report this information to our appropriate agencies. And this is Russia's affair to deal with [this company]."

Blokhin said such confiscation practices not only impose damages on Russian companies but also impair the "transit climate" in Belarus and the "image of our integration processes." Blokhin charged that the confiscation of Russian shipments is a "fully conscious" policy pursued by the Belarusian government. He cited statistical data which he called "terrifying." According to Blokhin, the Russian cargoes seized by Belarusian customs amounted to $15 million in 2000, $30 million in 2001, $60 million in 2002, and reached $60 million in January-September 2003. "Naturally, such a customs policy will prompt and is already prompting Russian businesspeople to find more favorable transit routes, even if this entails higher transportation costs," Blokhin said.

Aleh Pralyaskouski, deputy head of the Belarusian presidential administration, who was also present at the seminar, assured Blokhin that the Belarusian government is not conducting any confiscation campaign of Russian commodities. "The stance of our state is to consider transit a very important component of our economy, but not the only one," Pralyaskouski added.

Confiscation of commodities at the border is a revenue item planned for every year in the Belarusian budget, and the State Customs Committee regularly reports on its performance in this regard. For example, last week Belarusian customs officers seized more than 5.2 billion Belarusian rubles ($2.5 million) worth of goods. (Jan Maksymiuk)

"Who in the parliament is opposing the political reform? There are almost no such people there. The parliamentary majority supports the reform, the left parties, in general, do this, too. And I think that there are also a lot of supporters of the reform in the right-wing opposition, Our Ukraine and the Yuliya Tymoshenko Bloc. Thus, it is possible to create a majority of 300 votes [required to approve the reform], even with a surplus.... We still have two weeks until the deadline, before which it is possible to vote for the constitutional reform. -- Ukrainian President Leonid Kuchma in an interview with the Kyiv-based "Fakty" newspaper on 29 November.