July - 17 - 2011
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With winter rapidly approaching, everyone in the Baltic states is concerned with energy. Lithuania is in the same boat as the other Baltic states vis-a vis energy, an over-reliance on one supplier – Russia. It is also the key state to help them to diversify, as we shall see.

Energy issues
A paper on a European Strategy for Sustainable, Competitive and Secure Energy issued by European Union Energy Commissioner Latvian Andris Piebalgs in March 2006 referred to the Baltic states as an “energy island.” It was the first time the phrase was used, it caught on and has been going the rounds ever since.

Piebalgs’s label for the Baltic states refers to their being cut off from supplies of oil, gas, and electricity. With few natural resources of their own, the Baltic states are increasingly reliant upon external suppliers. More troubling for states that only managed to break free of the Soviet Union 16 years ago, the word “suppliers” can be replaced, for all intents and purposes, with the singular, “supplier”: Russia.

Piebalgs revived his catchphrase while speaking in Riga in May, saying: “I would like to see the Baltic states at the heart of [the EU's energy] transformation. This would fit well with the acute need for greater security of energy supply in these states, which have for too long been an energy island dependent upon one major supplier of gas.”

Worries about the reliability of Russian oil and gas supplies are at the heart of the energy island question. Russia’s vast resources are controlled by the state in a manner that harks back to the days of the command economy, only now it’s with a monopolist rather than communist flavour.
The Baltic states watched while Gazprom turned off the taps to Ukraine in 2005 and threatened to do the same with Belarus. Evidence already points to Moscow’s willingness to treat the Baltics similarly. In July 2006, delivery of crude oil to Lithuania via the ironically named Druzhba (Friendship) pipeline — the longest in the world — abruptly ceased and has never resumed. The Lithuanian government has yet to receive an explanation from Russian oil transport monopoly, Transneft, about the sudden cut off other than a few vague comments about “damage” that’s not worth fixing.

Kirkilas expressed his alarms in UK
Not surprisingly, Lithuanian Prime Minister Gediminas Kirkilas was an early adopter of the energy island concept. He delivered the first major speech clearly expressing Baltic dismay at Russia’s use of energy as a political tool when he addressed the Royal United Services Institute (RUSI), a British defence think tank, on 21 May 2007.

“We are concerned about the energy monopolization in Russia, ranging from extraction and production to transport, sale, and transit,” he told RUSI delegates.

Kirkilas’ fear is well-founded. Gazprom and Transneft not only have huge assets in Russia, but they also have used their soaring profits to buy big stakes in the Baltics’ own energy infrastructure. For example, Gazprom owns big pieces of Latvijas Gaze, Eesti Gaas and Lietuvos Dujos, the national gas storage and distribution companies.

“How can we speak about the single energy market if, for example, the Baltic states are still energy islands?” Kirkilas asked. “We should ask ourselves why energy is being more and more associated with politics, and not with economies.”

Since then, the Baltic states’ efforts to ensure their future energy supply and energy security have started to look inadequate. Rather than addressing the problem, a series of attempted solutions have seen the Baltics drifting slowly away from each other.

Ignalina II to the fore
At the forefront of the energy island issue is Ignalina in Lithuania. The only existing nuclear power station in the Baltic states, Ignalina is a Soviet-era reactor with a design similar to that of Chernobyl. It is scheduled to be decommissioned by 2009, and an agreement to that effect even was included as a condition of Lithuania’s joining the EU in 2004.

Given the huge costs of building a replacement (approximately 6.25 billion euros), a new project was envisaged in which all three Baltic countries would participate. A project of construction of a nuclear power plant with power capacity of 3,200 – 3,400 megawatts by all three Baltic states is being now elaborated in Lithuania. However, according to expert estimations, the new nuclear reactor could appear only in 2015. Then Lithuania invited Poland to the party, much to the surprise of Latvia and Estonia. Poland wasted no time in showing how the addition of one partner can make a project many times more complex.

Poland was a no-show at a signing ceremony designed to officially launch Ignalina II. It caused further embarrassment at another showcase event, the Vilnius Energy Conference earlier this month. Just before it began, Polish economy minister Piotr Wozniak announced that Poland would need at least one-third of Ignalina’s output. Poland added further pressure by making it clear that failure to come up with the demanded wattage would result in a go-slow on construction of a “power bridge” to link Lithuania’s electricity grid with Western Europe.

Ignalina II was supposed to be operational in 2012. With so little progress made, however, even a revised switch-on date of 2015 is looking optimistic and would leave Lithuania with a six-year energy supply gap that could cripple the economy.

Recently signs have emerged that Lithuania may be thinking about asking the EU for an extension of Ignalina’s lifespan. Energy Commissioner Piebalgs has slapped down such suggestions as “vain discussions,” but what Lithuania is clearly angling for is an increase in its EU compensation package.
The power bridge ultimatum must have been particularly galling for Lithuanian President Valdas Adamkus, who has been campaigning for links to both Poland and Sweden for years. “I urge the European Union to show real and more active support for this and other regional energy projects aimed at solving the problem of the so-called energy islands,” Adamkus said, employing Piebalgs’s catchphrase at the launch of the Vilnius Energy Conference. “New bridges are needed to connect these islands in order to create an effective and viable European energy network.”

At the Vilnius conference, which Adamkus had worked so hard to establish, he promised that an agreement on the power bridge would be signed “within days.” A month later, nothing had been signed.

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