From Moscow’s Pipeline to Economic Freedom: How Poland’s Energy Crisis Became a Wake-Up Call
Alex Mykhalchuk | Pablo Ventura Admirall
Russia’s full-scale invasion of Ukraine in February 2022 triggered one the largest energy shocks in Europe in the 21st century. Poland entered 2022 heavily reliant on the Russian oil and gas economy. The crisis transformed long-standing commercial relationships between Warsaw and the Kremlin into a macroeconomic crisis. Shocks in oil and gas supplies led to inflation, slower growth, and higher prices, exposing how tight energy security is tied to broader economic stability. Against these market conditions, energy independence became a core strategy for self-sufficiency and true economic freedom. Poland’s diversification efforts transformed its economic model from fragile in the face of volatility to a strategically placed and ready for market turmoil, which allowed its government to make decisions that satisfy interests of Polish people and not Russian corporate giants.
Poland’s pre-war overreliance on Russian oil and gas imports exposed the country to macroeconomic risks that materialized after Russia invaded Ukraine in February 2022, contributing to lower GDP, higher prices, and surging inflation. In 2021, 74.0% of all gas and 60% of all oil imported by Poland came from Russia. Following the Russian aggression in 2022, the price of natural gas on TTF (Title Transfer Facility, a virtual European gas trading hub located in the Netherlands that sets the benchmark price for natural gas in Europe) increased by ~590.0% compared to the 2015-2019 averages, while oil prices rose by ~100.0% for Russian oil. Consequently, broad oil and gas market shocks affected the Polish economy in several ways. Total GDP reduction of 2.4% is attributed to the markets under review. Gas supply shocks raised relative domestic gas prices by 46.0%. Oil market volatility increased relative domestic fuel prices by 13.0%. As a result, the whole economy bore costs of the market’s turbulence: Poland’s HICP inflation averaged 13.2% in 2022, compared to a geometric mean of 1.5% over 2010-2019. Poland’s heavy reliance on oil and gas imports from Russia compromised its economic sovereignty by being dependent on a politically unpredictable regime with revisionist ambitions. By trading crucial commodities such as oil and gas with the Kremlin, Poland effectively placed itself in a dilemma: diversify its domestic oil and gas market model away from Russia which will put upward pressure on government spending or remain reliant on cheap commodities and pay even higher costs in the long run.
Import diversification has been underway in Poland regardless of the Russian invasion of Ukraine, which only became a catalyst for rapid changes. Oil imports had already been declining for several years even before Russian aggression: the share of oil imported from Russia has fallen by almost 30.0% over the past decade. However, the events of February 2022 forced Poland to take even more radical measures for the sake of its economic independence. Actions undertaken consisted of efforts to decrease Russian imports in the private sector, more efficient exploitation of existing capabilities and cooperation with neighboring countries such as Slovakia. Domestic refineries decreased their exposure to Russian oil from 61.0% in 2021 to 42.0% in 2022, in 2023 they imported less than 10.0% of their oil from Russia. Furthermore, Poland has expanded its storage bases in the city of Gdansk, and unlocked more volume at its’ largest transshipment base, Naftoport, which is in Gdansk as well. Poland is diversifying its oil infrastructure not only domestically, but also by building joint projects with its neighboring countries: in May 2022 Poland and Slovakia finished construction of a Vyrava interconnector pipeline, which significantly improved the trading efficiency between the two. On the other hand, Poland’s gas diversification away from Russia was incentivized by Gazprom (Russian state-owned gas company) itself when in April 2022 they completely suspended its natural gas supplies.
Poland’s early investments in gas diversification prevented a major supply crisis when Gazprom cut flows. In 2022 Poland enlarged the already existing LNG terminal Świnoujście which connects the Czech Republic and Germany. Furthermore, in May of the same year Poland opened the Poland-Lithuania interconnector which began its construction all the way back in 2020. In addition, the government was actively involved in risk mitigation and placed construction of the FSRU (floating storage registration unit) in the Gulf of Gdansk on a fast-track investment track, which will allow it to diversify further away from Russia at a higher speed. Poland’s gas initiative, which was started a long time before the Russian aggression, clearly demonstrates the importance of diversification. Poland was aware of the need to move away from Russian oil and gas a long time before the Ukrainian war, consequently they were on a fast track to complete all their transitions as soon as February 2022 events took place. Even though Poland was still damaged by the structural changes to the energy market, due to their wise energy policy they were able to relatively smooth out the consequences of the energy crisis. However, successful policy in the past does not always lead to the right decisions in the future. Further diversification and awareness to external risks that can shock supplies should be considered when mapping out economic independence moving forward.
Poland’s forward-looking strategy rests on infrastructure expansion and regional integration. Gas supply diversification will directly depend on Poland’s ability to deliver on the construction of the Baltic pipeline which will go Norway-Denmark-Poland as well as maintaining and further developing their infrastructure in Poland to be able to efficiently transport the gas across the country. It takes the same approach with the oil supply: development of infrastructure such as Pomeranian Crude Oil Pipeline and Boronow-Trzebinia section of the existing Plock-Koluszki-Boronow fuel pipeline will allow it to increase transmission efficiency which, as a result, will lead to adequate storage capacities. Hence, the pattern of the energy policy is clear and can be summarized as a wide connection to diverse sources of imports in order to mitigate risks of being over-reliant on a single supplier. Poland treats energy independence as a precondition for economic sovereignty by reducing its exposure to external coercion and severe macroeconomic shocks that it went through during the 2022 Energy Crisis.
Poland’s trajectory shows how pre-war overreliance on Russian oil and gas resulted in macroeconomic vulnerability once Russia invaded Ukraine. Pre-existing diversification measures and accelerated government policies and private sector efforts cushioned but did not eliminate the shock of slower GDP growth, soaring prices, and disrupted supplies. Today’s strategy of expanding pipelines, storage, and regional interconnectors is designed to hard-wire a more resilient and diversified energy system. In that sense, the 2022 Energy Crisis made clear that for Poland, energy independence is not just a technical goal to satisfy bureaucratic quotas, but a requirement to reclaim its economic freedom of action.
Alex, originally from Kyiv, Ukraine, is a sophomore at Columbia University School of General Studies majoring in Economics-Political Science. Prior to Columbia, he spent a year working for a specialty lender credit shop in Boca Raton, Florida. At Columbia Emerging Markets Society he focuses on Energy Markets in Eastern Europe. He is interested in how energy, geopolitics, and risk shape outcomes for emerging economies and investors who operate around them.
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