Artem Kuyun, co-founder of A-95 Consulting Group
How does Russian autogas get to Ukraine through Polish traders and why don’t sanctions work?
The first quarter of 2023 was remembered for the influx of cheap liquefied petroleum gas imported from Polish, Lithuanian and Latvian storage facilities that were spotted receiving trains with Russian LPG.
At the time, this resource with “fake” documents displaced 80% of all alternative sources of supply to Ukraine. In fact, for several months, Ukrainians were driving on Russian fuel and paying for it.
By official standards, the legislation was amended fairly quickly, and in October 2023, the screws were tightened securely. Customs began demanding documents from the producer for the entire transport chain, which immediately cut off European resellers of Russian gas.
But three months later, the situation resumed. In January, the market saw numerous offers of abnormally cheap gas from Poland and the Baltic states. There may be only one recipe for such success – Russian origin.
Favourable conditions have developed for the renaissance of Russian gas. Firstly, the blockade of the Ukrainian-Polish border has been lifted.
Secondly, it was because of these strikes that Ukrainian traders were so keen on fighting the deficit that they brought in much more gas than they needed. With the market flooded to the brim and demand catastrophically low, the price of gas in the country plummeted.
The imported resource was left out of the competition, and the stockpiled importers suffered losses. An important note: we are talking about non-Russian imported gas, because Russian gas seems to have been overcome.
Meanwhile, Poland has long had two price tags: one for gas imported from Russia and the other for the rest. In mid-January, road consignments of Russian gas at Poland’s eastern terminals were selling for an average of $588 per tonne. European suppliers offered $690-720/t, which is the absolute minimum. As you can see, the advantage is very convincing.
And now Ukraine is starting to receive more gas, which is $150/t or almost 20% cheaper than the cheapest European supply. In the first three weeks of January, at least 2.6 thousand tonnes of the suspicious product were imported.
The abnormally cheap gas is shipped from the cities of Sokulka, Narewka, Bialystok and Wulka Dobrynska, where gas from Russia is supplied en masse. These bases are operated by well-known Polish traders – Barter SA and Bialchem Group.
So there was supposed to be a European embargo? Indeed, at the end of last year, the European Commission imposed a ban on imports of Russian liquefied gas to the EU. However, there is a transitional period of one year for long contracts.
And, surprisingly, in Poland, where there were almost no TERM gas contracts, it turned out that everyone had them.
“At the moment, there is no visible decline in Russian gas supplies, and there is even a feeling that there is more of it. It seems that companies are well prepared in terms of contracts,” say Polish traders we know. So there will be enough Russian gas in the EU until the end of 2024.
Why can’t customs stop the resumed flow? The fact is that Polish traders have obtained licences from producers who issue documents in accordance with European law.
In private conversations, customs officials say they have no reason to stop these shipments because now suppliers do not resell but send their own products with the EUR.1 certificate.
In turn, some Ukrainian traders believe that customs officers could demand from the “producers” the components of LPG blends or, in fact, the raw materials for them. But something tells us that the Poles will provide any documents, as they also deal with non-Russian gas.
What to do?
A proven methodology has already been developed and repeatedly applied for such particularly cunning comrades – SBU sanctions.
Its effectiveness has already been tested by the Turks, Bulgarians and Moldovans, who tried to tell us that “everything is not so clear” against the backdrop of a flow of tankers with Russian diesel. Currently, imports to Ukraine from these destinations have virtually stopped. It looks like there are more smart people out there.
We need to act immediately. For now, the influx of Russian gas is being held back by low demand, but it is clear that this trickle will quickly turn into a river. Gas that is $200/t cheaper than the market has no competitors.
P.S. What is really surprising is the attitude of Ukrainian companies that have happily started importing the “toxic” resource. No one will be forgotten.
Source: Ekonomichna Pravda.