Russia still strong energy player in the Baltics

February 22, 2008

Riga – The three Baltic states of Estonia, Latvia and Lithuania have often clashed with Russia since the fall of the Soviet Union 17 years ago. Fighting over national minorities, the Baltics have also been heavily dependent on Russia for energy thanks to the Soviet-era infrastructure. Seeing how Russia uses its energy to advance the political goals in Ukraine and Georgia, the Baltics, which joined the European Union in 2004, opposed the construction of the Baltic Sea gas pipeline between Russia and Germany.

Lithuania has sold its oil company Mazeikiu Nafta first to the Americans then to Poles, thwarting Russian advances both times. In response, the Kremlin cut off oil supplies to Lithuania.

Now Latvia is facing an energy shortage when the nuclear reactor in Lithuania will be shut down in 2009. And the Baltic nation may seek a more accommodative position with Russia to secure its energy supplies.

Russia is willing to help in Latvia’s construction of a new electric plant, the new Russian Ambassador to Riga Alexander Veshnyakov told the Russian-language newspaper Telegraf on Friday.

“The whole Europe knows that we are reliable partners, and so does the Republic of Latvia. For many many years Latvia has been receiving gas from Russia and it maintains a unique gas storage, in which Russia also participates,” he told the newspaper.

When the Soviet-built Ignalina Nuclear Power Plant in north-central Lithuania will shut down as part of the requirements to join the 27-nation bloc, the Baltics will face the energy shortfall.

Lithuania still hopes to persuade the European Commission (EC) to extend the life of the power plant, however both the EC and Lithuania have been skeptical.

Latvia has declared it is “neutral” on the Nord Stream project as long as it doesn’t harm the Baltic Sea environment.

“The Nord Stream decision is made by a supplier and a consumer,” Andris Teteris, a representative of the ministry of economy told dpa. “It’s not going through Latvian territory.”

Estonia and Lithuania fear that Nord Stream would offer Russia an opportunity to disrupt energy supplies to the former Soviet republics without disrupting supplies to partners in western Europe, thus offering the Kremlin more political control in the region.

With time running out, the Baltics are being pushed to act. After months of delays, Lithuania and Poland formally agreed this month to connect their power grids, effectively plugging the Baltic electric grid to the rest of the EU.

Yet, the efforts to build a new Ignalina Nuclear Power Plant have been ridden by delays over how much energy should each partner get from the new nuclear station, making Estonia and Latvia edgy.

Latvian government has been promoting natural underground gas storages as an alternative to Russian gas supplies, saying the stored gas could be used at the time of high demands or break in supplies from Russia.

The EC allocated more than 1 million euro (1.47 million dollars) for an economic feasibility study to build such a storage 80 kilometres southwest of the Latvian capital. While the study is expected to conclude by the end of 2009, the project also stands to gain from the Russian support.

The Russian monopoly gas giant Gazprom would have to decide if it wants to link the storage with the Nord Stream pipe, said Vinsents Makaris, a spokesman for Latvijas Gaze, Latvian gas company, told Deutsche Presse-Agentur dpa.

“There’s a point to build the facility only if it’s connected to Nord Stream,” he said.

Not only the Russian gas would be stored there, but the company that owns the rights to the land of a possible underground gas storage are connected to two sons of the former Russian ambassador to Latvia, local media reported.