Tuesday, May 31, 2022

Poland sends thousands of tons of fuel to Ukraine

 Since the beginning of the Russian aggression, Poland has supported Ukraine on various levels, including energy and sending thousands of tons of fuel to the east.

From the Polish perspective, aid sent to Ukraine is a matter of geopolitical importance. Putin not only threatens Poles but also security throughout Central Europe. Therefore, the support offered to the Ukrainian side is as broad as possible.

After February 24, the fuel situation in Ukraine became dramatic. The gas stations lack all types of fuel. Still, a large part of the available resources goes to military needs - station operators are obliged to release gas or diesel to military personnel who come to refuel their equipment. Restrictions are imposed on civilians - a private person can buy a maximum of 20 liters of fuel at the station unless they have a fleet card - then the available volume is 40 liters. 

Economic issues are also an obstacle: the Ukrainian government released fuel prices, which had been regulated for years. A liter of gasoline in Ukraine is now around PLN 7, so the price level has equated to Poland, although it was always around 30% cheaper on the Ukrainian side. Ukraine also suffered significant losses in the fuel infrastructure, especially in fuel depots, which reduced the storage capacity and inventories.

Ukraine's partners - primarily Poland - began to react to these problems from the very first days of the war. On February 25, the Ministry of Climate and Environment received a letter from the Ukrainian embassy in Warsaw requesting technical assistance in fuel supplies. The ministry created a legal mechanism to manage agency stocks in a brief time. It released part of Polish fuel stocks, transferring them to the strategic reserve and making them available - under the Prime Minister's direction - to other countries as humanitarian aid. This enabled the commencement of fuel supplies to Ukraine. By the end of May, the volume of supplies may reach as much as 55,000 tons of gasoline and diesel oil (approximately 73 million liters). This places Poland in the role of the undisputed leader of fuel aid for Ukraine.

However, due to the growing problems and needs, Ukrainians are interested in increasing this volume. The needs of the Ukrainian side amount to approx. 200 thousand tons per month (approx. 264 million liters). The fuel that is transferred is, among other things, used by ambulances or state service vehicles. To this end, Poland began to organize aid for Ukraine in the international arena.

Poland began to seek support in two ways: humanitarian fuel deliveries made free of charge as part of international aid. Belgium has pledged to transfer 34,000 tons of diesel oil, Germany has sent 10,000 tons, and assistance has also come from other countries. Some countries (like France) donated the fuel directly.

The second dimension of support was financial assistance transferred to the accounts of the Polish Governmental Agency for Strategic Reserves. The collected money is to be used to purchase fuel for the Ukrainians. The payments have already been made by, among others, Denmark, the Netherlands, Latvia, and Germany.

The released volumes of fuel do not affect the price situation in the Polish market. The aid provided to Ukrainians does not increase fuel prices at Polish gas stations - the materials are provided by the government, not companies. What's more, the inventories released are a small part of what is in Polish warehouses. They are full enough to allow the economy to function for more than 90 days, and Polish stocks are monitored and analyzed on an ongoing basis.

After the first humanitarian deliveries, Warsaw began to strive to make fuel cooperation a part of the market solution. For this purpose, representatives of selected oil companies from Ukraine were invited to Poland, where business contacts were established with local companies. Poland wants to replace the existing Russian and Belarusian fuel suppliers to Ukraine.

Commercial deliveries have already started, but they do not significantly impact the price situation in the Polish market, which is shaped depending on local fuel demand.

Ukraine is also interested in permanent access to the port in Gdańsk (where there is, for example, the oil terminal), which raises hopes for the consolidation of transport possibilities, for instance, the Gdańsk-Odesa railway line, which in times of peace was only a theoretical project. 

Poland may become a vital element of the material supply chain to Ukraine, fuel, and other goods delivered from the West.