Balts hope Georgia conflict boosts energy case

Patrick Lannin
October 8, 2008

TALLINN (Reuters) – Ulo Kikas, harbor captain at the port of Muuga, stands at the top of the multi-storey harbor building near Estonia’s capital and points down to a network of vacant railway tracks for oil product wagons.

“That used to be full of trains,” he said. In the distance is an empty quay. “That is the coal terminal. There used to be piles of coal there, you could see them from here. Now there is nothing.”

The reason, Estonian officials say, is that Russia diverted shipments of oil products and coal from Tallinn port after a diplomatic row last year in a display of its willingness to use energy as a political weapon.

The port is one focus of concerns about energy security in the Baltic states which intensified after Russia’s incursion into Georgia in August.

Russia denies using energy supplies to pressurize recently independent neighbors, and global financial crises have drowned out the talk of a new Cold War that surfaced then.

But the United States has since made a modest contribution to the self-proclaimed “energy islands” of Estonia, Latvia and Lithuania, agreeing in September to give Lithuania $800,000 for a feasibility study on a liquefied natural gas terminal.

“We have seen Russia using energy as a political weapon,” U.S. Ambassador to Latvia Charles Larson said in a recent interview with the Latvian daily Diena. “We do not accept that as we believe it can threaten security of countries.”

Though squabbling among themselves on how to diversify their energy supplies, the Baltic states hope Russia’s conflict with Georgia will win them greater support from the European Union and force the bloc to re-think its own energy priorities.

“Probably more people are ready to listen (to the Balts),” said Arkady Moshes, Russian program director at the Finnish Institute for International Relations. “But this does not mean (other EU members) are ready to accept a blueprint for action.”


Gas is the biggest worry for the three Baltic nations as Russia is their sole supplier.

Another concern is that the Baltic power grids are linked mostly to Russia, Belarus and Ukraine — all six were Soviet republics — though the region got its first energy link to the west since the collapse of the Soviet Union when a new cable joined Estonia to Finland in 2006.

The Baltic economies are also vulnerable through transit trade: their ports, railways and roads are used to ship goods between Russia and the west.

A good earner for the Baltics, these channels are where the politics of energy has been most keenly felt.
Russian officials have said they plan gradually to re-route their energy exports to domestic from foreign ports, but have speeded up the process.

Tallinn port has seen a steady fall in energy shipments since Estonia moved a Red Army monument in April 2007, prompting a row with Russia.

Russian coal shipments through Tallinn dwindled, from up to 750,000 tons a month before the dispute to tens of thousands of tons and, in April 2008, zero. Deliveries picked up in the June-August period, but only to tens of thousands of tons.

Estonian officials say Russia’s rail operator, Russian Railways, refuses to lease wagons to firms wanting to ship coal via Estonia. A similar trend, though less drastic, has affected shipments of Russian diesel, petrol and heavy fuel oil.
“They have for a long time had the idea of moving to use only their own ports … but I think that after April last year there was a push to build these (Russian) ports much faster,” said Estonian Railways Chairman Kaido Simmermann.
In Latvia, Russia closed a crude oil pipeline to the port of Ventspils in 2003. At the end of 2006, Moscow closed an oil pipeline to Lithuania after Vilnius sold an oil refinery to a Polish, rather than a Russian, company.

Some of the transit coal Estonia lost seems to have gone to Latvia, whose ties with Russia have improved in recent years.

Latvian Transport Minister Ainars Slesers is optimistic.

“They will definitely in the future send oil via their own ports, but they produce much more coal than they can export,” he told Reuters, adding that container shipments would also grow.


The Baltics’ other main worry is security of supply.

They were pleased when the European Union last month froze talks with Russia on a new partnership accord and noted the need to diversify energy supplies.

But the problem for the EU is that finding alternatives to Russia is not easy and there are deep divisions within the bloc.

Some Baltic diplomats point with annoyance to Germany’s backing for the Nord Stream pipeline under the Baltic Sea, which will take gas from Russia to Germany — which gets more than 40 percent of its gas from Russia and will part-own Nord Stream.

They say the pipeline is against Baltic interests as it allows Russia to deliver gas directly to Europe, raising fears that one day Russia could turn off Baltic supplies without angering European customers. Russia has dismissed such fears.

“We’ve done business for 35 years with Europe, and nothing, not the Cold War, nor the breakup of the Soviet Union has changed this cooperation,” said a spokesman for Russian gas giant Gazprom. “For us, it’s business as usual. We’ve been a reliable partner for some time.”

The Balts have trouble cooperating among themselves.

They have struggled to find a joint stance in key areas, such as power links with Sweden and Poland, and a new nuclear power station. Lithuania pledged on joining the EU to close the Ignalina plant at the end of 2009.
Lithuanian President Valdas Adamkus, speaking during a visit in September by German Chancellor Angela Merkel, framed the problem in stark terms.

“If they (Russia) close the taps … our economic life will be destroyed and the progress we have made during the years of our membership in the European Union would end, we will no longer be equal members of European life, we will no longer be competitive,” he told a news conference.

(Additional reporting by Nerijus Adomaitis and David Mardiste; editing by Sara Ledwith and Tim Pearce)
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