Chinese Electrical Outlet, or How Chinese Help Belarusians to Solve Energy Deficit?

While all eyes focus on Ukraine deeply stuck at crossroads choosing a proper direction, Eastern and Western donors zealously compete in Belarusian energy sector.

In early November, the World Bank offered a $90m loan for the reconstruction of several Belarusian power stations. The loan became a new vivid example of how pro-Western international organisations and truly oriental Chinese credit agencies involve themselves in similar energy projects. 

World Bank's projects satisfy expectation of both the general public and government organisations involved, meanwhile the feasibility of accepting the Chinese financial support raises a hot debate. Belarusian government receives loans from China in the form of export credits that limit Belarus to purchase only Chinese goods and services.

Belarus allowed China to carry out a number of its infrastructure projects, such as rail roads, highways and power plants. Belarus experts hotly debate the feasibility of these projects for Belarus.  Belarusian government receives financial support from China in the form of export credits that limit Belarus to purchase only Chinese goods and services, thus, export-credit yuan’s never leave China.

Chinese export credits pose only international assistance that Belarus receives with no conditionality for the regime type or necessary administrative reforms. The occurrence of Chinese export credits is an important step for Belarus development since Chinese export agencies provide a new source of capital, especially for much-needed infrastructure investment. Another positive consequence of the Chinese export credits is that a final good remains in Belarus and Belarusians benefit from using it in everyday life.

The question remains, however, what are the drawbacks of the Chinese participation in renovation and expansion of the Belarus infrastructure? This article discus some issues that come together with the utilization of the Chinese export credits in the electrical energy sector. This piece belongs to the larger analytical project that tracks numerous infrastructure projects carried out in Belarus with the help of the Chinese financial support.

Buying Ecological Concerns

Belarus adopted Chinese power generating turbines in several power stations. The largest Belarusian power plant, located in the town of Lukoml, received a turbine purchased via the Chinese export credits. Minsk Thermal Power Plant 5 (TPP-5) implemented another Chinese-made turbine. During the renovation, the Minsk Thermal Power Plant 2 (TPP-2) two steam turbines, recovery boilers, and a booster compressor station.

China National Corporation for Overseas Economic Cooperation (CCOEC), previously called China National Corporation for Building Materials Exportation, became a general supplier of complex equipment for the TPP-2 plant. The reconstruction cost totaled $77m, where $47m came through the Chinese preferential loan from the Export-Import Bank of China.

Despite being a cleaner fuel than coal or oil, natural gas also pollutes environment by producing nitrogen oxides and carbon dioxide. The Chinese could not instal already produced equipment in their power plants due to the new energy policy that discourage to build air polluting power plants.

Belarusian independent mass media has reported numerous outrages within the projects realised with the Chinese investments. Belarusian power plant renovations that involve the Chinese participation can indeed result in negative ecological consequences.

Even though China’s central government promotes protection of the ecology, it is not responsible for any single project. It only creates incentives for Chinese companies to start investment projects in Belarus without being responsible for any single product or service.

Contracting Out Foreign Labor

Belarus not only buys Chinese equipment, but also contracts out Chinese companies to construct on the power plants’ site. An example here became a new power block built in a separate building at Minsk TPP-5. Utilising $340m of the loan, Chinese companies built a second power block with a capacity of 400 MW. The Chinese carried out construction and installation completely on their own.

Can the Belarusians build power plants on our own? Do Belarusian engineering and construction companies have enough of the work that they would not mind this job done by the foreign investors? Even though the answer to the both questions remains obvious, Belarus lacks of investment capital to initiate the renovation or construction on its own, and thus, appeals for the foreign financial support.

The Belarusian case, however, does not stand out from the rest of the developing countries worldwide. Belarus belongs to a large group of countries who warmly welcomed the Chinese construction companies.

The Chinese, using export-credits, sent experienced workforce to the countries with a demand for compatible types of power plants, and where with their investments and people such projects can start off. The Chinese have already completed a number of coal power projects in Indonesia, Thailand, Philippines and Vietnam.

Costs of Idle Equipment

In addition to the ecological and employment problems, Belarusians have to bear the consequences of the purchased equipment being idle. During the reconstruction of the TPP-5 Plant, the Chinese also supplied the necessary equipment. A year after launching the second block, the new Chinese gas turbine broke down with an estimated time for the repair of one year.

At the beginning of 2013, the Belarusian mass media became overflowed with rumours about the explosion on another block of Minsk TPP-5 Plant.  The officials, however, claimed that the block stopped working due to the repair planned and intended to last until mid-March 2013.

After the modernization project, Minsk TPP-5 Plant became the fourth power station in the Belarusian energy system. The station, however, remained unproductive for at least six months. In the second half of 2013, neither one of the two blocks of the Minsk TPP-5 Plant are operating or producing energy.

Belarus cannot afford paying for new equipment that increases Belarusian electric production capacity only on paper. 

This situation resembles the issues experienced by the plants in China. Even though China became a number one country in the capacity of wind power, one fourth of the farms still need connection to the grid. While Chinese companies already satisfy the central government just by meeting capacity goals, Belarus cannot afford paying for new equipment that increases Belarusian electric production capacity only on paper.

Minsk's energy system remains energy deficient. Before launching the second energy block, Minsk TPP-5 Plant lacked about 800 MW of generating capacity. The new energy block of 400 MW launched into the system has decreased deficit, but has not resolved the problem. What about the harm caused to the environment? The new gas-fueled blocks in Minsk TPP-5 Plant indeed will compound the issues with air pollution.

In the meanwhile, the Chinese managed to give employment for contractors that had to change their specialisation if they were to stayed working in China. They also sold equipment already produced, but impossible to instal or use in Chinese power plants due to the new energy policy in place.

And to top it off, they expect to receive from Belarus an annual interest that varies from 2.5% to 5.33% to pay off the loans. The number of Chinese officials benefited from bribes and kickbacks from the tenders and construction remains hard to estimate.

Palina Prysmakova

Palina is a PhD Candidate in Public Affairs at Florida International University​

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