Lithuania and Russia: Can energy be a weapon?

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Lithuania is seeking more independence from Russia in energy supply. Moscow, so the accusation, uses supplies of gas and electricity as leverage. A planned Akw in Belarus see the Lithuanians with concern.

Lithuania’s perhaps biggest problem right now is close to the border of the Baltic state. Only 50 kilometers from the capital Vilnius, a new nuclear power plant will be built in neighboring Belarus. The Lithuanians are worried about the project, says Energy Minister Rokas Masiulis. “We lived in the Soviet Union. We know the quality of construction in such projects. “Unfortunately, that is not much different in Belarus today, emphasizes the Minister. The small neighboring country was alarmed by reports of accidents on the construction site.

At the Astrawez site, the 330-ton reactor shell collapsed to a height of two to four meters in July. For more than two weeks, the Belarus authorities did not disclose the incident. It was only after an opposition politician reported that the government in Minsk admitted the incident, and it was only after numerous media reports that it was decided to exchange the reactor shell. Many felt reminded of the information policy of the Soviet authorities after the nuclear disaster in Chernobyl. Lithuania is now calling on the EU to demand compliance with standards for the construction of the nuclear power plant in Minsk.

But the Lithuanians are by no means solely concerned with security concerns: “We feel treated unfairly,” says Energy Minister Masiulis with a view to the European Union. Because of pressure from the EU, the new member had shut down the only own Akw in Ignalina at the end of 2009. Now, on the other side of the border, a new facility is emerging that nobody in the EU seems to care about, criticizes Masiulis.

Dependent on electricity imports

With the shutdown of Ignalina Lithuania suddenly had to rely on electricity imports. This increased dependence on Russia dramatically. The then government in Vilnius therefore wanted to build a new nuclear power plant as soon as possible. But as soon as Lithuania’s ideas became known, both Russia and Belarus announced plans for their own Akw. Lithuania’s construction project was rejected in 2012 in a referendum by a majority of the population. The project has since been on ice.

However, should the Akw in Belarus go online as planned in 2019, the Lithuanian market could be flooded with cheap electricity, says Lithuania’s Energy Minister. Then the generation of own electricity would be hardly worthwhile for the country. The government in Vilnius sees in this Akw therefore not only a danger to the environment. “Russia uses energy as a political tool,” says Masiulis. Behind the project in Belarus is the Russian state-owned company Rosatom, which not only supplies the technology, but also gives cheap loans. “Rosatom is the new Gazprom,” warns Masiulis – alluding to the role of the Moscow-led company as a tool of Russian politics. Even more obvious is Romas Švedas, a former member of the Government and a diplomat and today a lecturer in international relations at the University of Vilnius: The Akw project in Belarus is “a deliberate aggression against an independent country that uses energy as a weapon”.

All too well, the Eastern Europeans still remember how in the winter of 2008/2009, due to a conflict between Moscow and Kiev over supply contracts, suddenly no Russian gas came through the Ukrainian pipeline. Since then, especially in Eastern Europe, there are fears that such a scenario could be repeated. Indeed, there is once more a dispute between Moscow and Kiev over gas supplies: Russian President Vladimir Putin criticized Tuesday in a telephone conversation with German Chancellor Angela Merkel that Ukraine is avoiding an agreement with Moscow on the purchase of Russian gas this winter. At the same time, Putin warned that this constituted a “threat to transit to Europe”.

Unforgotten in Vilnius is the case with the oil pipeline “Druzhba”, which brings Russian oil to the west. The section that led to Lithuania, was surprisingly shut down in 2006 – according to Russian information for a leak. Shortly before that, a refinery that was supplied with oil from the pipeline was not sold to Russian bidders, but to Polish bidders, says Svedas. To date, the operation of the pipeline has not been included.

Energy policy in Lithuania today is understood as a question of national security. Hardly any other country in the European Union was as dependent on Moscow as the Baltic state. All of the natural gas consumed in the country came from Russia, and the electricity has been largely imported from Belarus and Russia since the shutdown of the Akw. Diplomats still remember that the head of the Lithuanian government used to travel to Moscow to discuss the price of gas with the Gazprom boss. For both gas and electricity, Lithuanians paid significantly more than, for example, their neighbors in Belarus, which continues to maintain a good relationship with Moscow. By contrast, the relationship between Lithuania and Russia has been tense at the latest since NATO accession.

Liquefied gas from Norway

Within only two years, the situation has changed radically. Lithuania wanted to get out of dependence on Moscow and build bridges to Europe. At the end of 2014, a liquefied gas terminal went into operation in the port city of Klaipeda, the first in the three Baltic states. The floating terminal is called “Independence” – the country sees much more in it than a project in the field of energy. Lithuania is no longer dependent on Gazprom supplies, said President Dalia Grybauskaite. “No one will be able to blackmail us or force us to pay a political price.” Liquefied gas for Lithuania comes mainly from Norway. In addition, a pipeline will be built in the coming years, connecting Lithuania and Poland.

The terminal has actually brought the country the hoped-for independence: Today, not more government members, but business representatives in Moscow negotiate delivery prices, as in other countries too. For gas imports from Russia, the Lithuanians now pay significantly less than two years ago, as the competition by the – but also not exactly favorable – liquefied gas effect. “Gazprom was forced to lower the price,” says Švedas.

But the gas consumption of the Baltic country had also fallen. Because when Russian gas was still expensive, heating plants in particular looked for cheaper alternatives and switched to biomass. Today, 60 percent of the heat is extracted by wood pellets from Lithuanian forests. Gazprom forced the country to look for alternatives, says Energy Minister Masiulis. In 2014, Lithuania was the first country in the EU to implement the requirements of the so-called third energy package in the gas market, according to which grid operators, utilities and suppliers may not be identical. Gazprom had to sell its stakes in Lithuanian energy companies.

However, the government in Vilnius has failed in its attempt to counter the inflated gas prices of previous years. The country claimed $ 1.5 billion from Gazprom in a four-year legal dispute before a Stockholm arbitral tribunal. But the tribunal saw no breach of contract and gave Gazprom right. After this defeat, Lithuania now wants to have the arbitration award, against which no appeal is possible, annulled in court.

This year, for the first time, the country could import more gas from Norway than from Russia. The Baltic states are also relying on Moscow independence for electricity imports. Only a few years ago, the Baltic States paid the highest electricity price in Europe. However, a year ago, the first electricity connection, which connects Lithuania to the EU network, went into operation: in December 2015, the route from Lithuania to Poland was completed. Again, President Grybauskaite spoke of a “strategic achievement”. Other lines connect the country with Sweden since February.

More than a billion euros have cost both projects in total, about one third of which was paid by the European Union. “Today, electricity prices are 23 percent lower than in 2014,” says electricity utility Litgrid in Vilnius. Only 30 percent of imports come from non-EU countries, ie from Belarus and Russia. However, Lithuania’s power grid still hangs on the Russian, because both are synchronized. The Baltic states are aiming for a synchronization with the European network, but this project is costly and can take time, especially since it is not clear what happens to the Russian exclave Kaliningrad. The EU Commission has begun consultations with Russia on behalf of the Baltic States on this issue.

While Lithuania has made good progress in trying to become less dependent on Russia within two years, there are other concerns about energy security. Shortly before Christmas 2015, electricity was lost in western Ukraine, affecting some 700,000 households. Security experts later stated that it was not a technical glitch, but that hackers had intentionally caused the blackout – the attack is the first known case of its kind in Europe.

Center of Excellence of NATO

The Lithuanian electricity supplier Litgrid now wants to better protect itself against possible dangers and has therefore agreed to a cooperation and an exchange of experience with the Nato Center of Excellence for Energy Security in order to better protect its own network “from any disturbances”. The center is housed in a nondescript two-storey building on the premises of the Military Academy in Vilnius. In front of the house flutter the flags of the NATO states that carry the center. The centers of excellence of NATO are not part of the command structure of the Alliance and are primarily intended to provide expertise, so rather resemble small think tanks. Germany also wants to participate in the center from the spring of next year, as a spokesman for the Ministry of Defense confirmed.

The center has analyzed the hacker attack on the Ukrainian electricity supplier and tries to learn from it how countries can protect themselves from similar attacks. “Our biggest concern at present is cybersecurity,” says the Director of the Center of Excellence, Lithuanian Colonel Gintaras Bagdonas. The protection of critical infrastructure is, however, a matter for national governments, not NATO, he emphasizes. “We can not impose any rules on the private sector either.” The Center wants to raise awareness among Member States about risks to their energy systems.

In the Baltic States and in Poland, the planned pipeline Nord Stream 2 is also considered to be a potential source of energy for parts of Eastern Europe, supplementing the existing pipeline from Russia to Germany. The fear is that Russia could then shut down the connection through Ukraine. “Nord Stream 2 may seem like an economic project in the beginning – in the end it will turn out to be a political project,” says Lithuania’s energy minister Masiulis. For Ukraine, Nord Stream 2 could also be a reason to look for alternatives to Russian gas. “We have found a solution, and the Ukrainians will do that.”