Alyaksandr Lukashenka directed that scientists, economists and bureaucrats look into the possibility of reducing Belarus' dependence on energy imports from Russia. The National Academy of Sciences, Energy Ministry and Energy Efficiency Office have submitted two papers entitled the Concept to Ensure Energy Security and Reduce Economic Dependence of the Republic of Belarus and the Comprehensive State Program for the Modernization of Belarusian Energy System Facilities, Energy Efficiency and an Increase in the Consumption of Domestic Fuels and Energy Resources for the Period from 2006 to 2010. The Belarusian leader issued Edict N399 on August 25, 2005 to approve both papers.
Against the background of tough negotiations with Gazprom over gas delivery prices, Minsk is likely to give priority to both programs in the next few years. The programs' authors use three levels - normal, subcritical and critical - to assess the country's energy security. The following four indicators are at the critical level: 1) the dominating fuel, gas, accounts for 95 percent of the total fuel consumption in the power generation sector; 2) Russia accounts for nearly 99 percent of the energy supplies; 3) insufficient stocks of domestic fuels - oil fuel and gas reserves can run out within 22 days; 4) the power generation sector's capital expenditures account for just 4.7 percent of its fixed assets.
The following four indicators are at the subcritical level: 1) the ratio of domestic fuels on the consumption of fuels for heating; 2) the proportion of domestically produced power on the total consumption of electricity; 3) the ratio of natural gas on the total consumption of fuels for heating; 4) the wear-out of heating facilities. Only three indicators are considered normal: 1) the ratio of domestically produced oil on the total consumption of engine fuels; 2) the proportion of thermal power plants that can use two or more fuels; and 3) the ratio of the total power plant capacity to the power grid's maximum load.
The country's energy system is actually below the critical level, concluded Mikhail Myasnikovich, head of the Academy of Sciences; Uladzimir Tsimashpolski, deputy head of the Academy; and Presidential Aide Syarhey Tkachow. The conclusion came as a surprise, considering that the three officials ideologically and theoretically support the current government's socioeconomic policies. On the surface, Belarus has an advanced and attractive economic model, but in fact its key sector is in a deep crisis.
The officials stopped short of mentioning that the government has lost time and good opportunities to modernize the country's energy system. A repetition of the era of cheap Russian energy resources is impossible. Instead of upgrading the energy system, the Belarusian authorities opted to stimulate a consumption boom, i.e. to waste capital.
Lukashenka found himself in a difficult situation with an underfunded energy sector being stagnant at home, and Gazprom insisting on a price hike and demanding a share of Belarus' gas pipeline system assets. Minsk is unlikely to sell the gas pipeline system or other assets. The whole country would have to tighten its belt in order to overcome the energy sector crisis. The government has already set targets. The use of natural gas for heating should decrease to 78 percent in 2006 and to at least 65 percent in 2020. The share of natural gas in the total consumption is to shrink from 95 percent to 83 percent. The consumption of local fuels is to rise to an equivalent to 6 million tons of coal. The consumption of nuclear fuel will be equivalent 4 million tons of coal. Belarus is expected to build a nuclear power plant after 2010.
The proportion of local, non-traditional and renewable energy sources is to increase to 23 percent in the total demand for heating fuels. To make a breakthrough in the energy sector, Belarus needs billions of dollars in investment. The government estimates the five-year program at 5.2 billion rubels or just over $20 million. The money would hardly be enough to replace pipes and power lines. Paradoxically, only foreign capital can help the country maintain its energy security.
The Belarusian authorities have been scared by the country's bleak energy prospects. Bureaucrats drafted programs and concepts, but failed to make the second step - to create a system of energy efficiency incentives. This would require steps that go beyond the planned economy limits. One way or another, such steps will have to be made.