Poland fights for coal, but Russia may benefit – by Jan Cienski (Politco.eu – May 13, 2015)

http://www.politico.eu/

Poland’s defense of coal, which has been a measure of energy independence from Russia, might actually be an asset to the Kremlin’s influence.

WARSAW — When he was Poland’s prime minister, European Council President Donald Tusk called coal “the strategic foundation” of his country’s energy security, and Polish diplomats have acquired a reputation as some of the EU’s toughest negotiators, doing battle in summit after summit to minimize restrictions on its use.

But paradoxically, Poland’s dogged defense of coal, which generates almost 90 percent of its electricity, may now end up benefiting Russia. That is because cheap Russian coal is grabbing a growing share of Poland’s market, while local coal producers bleed red ink thanks to high production costs and very low prices.

“Individual mines can still be saved, but what cannot be saved is the state-owned coal mining sector,” says Jerzy Markowski, a former deputy minister of economy and coal mining executive.

Poland’s coal sector has long been a mainstay of the economy. In communist times, when Poland’s decrepit factories produced little that the West wanted to buy, coal was one of country’s few “profitable exports” — even if it was sold abroad for precious hard currency at less than it cost to mine.

The mines employed almost half a million people, and the power of the brawny miners prompted the communist regime to treat them with kid gloves.

A quarter century and €25bn in restructuring costs later, not all that much has changed. The mines now employ only about 100,000 workers, but their unions are still some of the toughest in the country. In 2005, angry miners wielding ax handles threatened to storm parliament, and the spooked politicians inside quickly voted through a generous pension program for them.

The unions have also fought hard to retain a gilt-edged pay package that has miners earning some of the highest salaries in the country. A recent report by the Adam Smith Center, a Polish economic policy think tank, finds that the average miner earns about €1740 a month, 90 percent higher than the average Pole; retires at the age of 48 instead of 60 on a pension subsidized by the government; and benefits from an overall government subsidy of €16,000, while the average Pole gets nothing.

Those fat checks and early pensions mean that labor accounts for about two-thirds of a mine’s operating cost. It costs about €77 to mine a tonne of hard coal, according to the Economy Ministry. However, last year the average sale price in Poland was only €69 a tonne.

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