Gazprom 'Up to Shady Games in Lithuania' - Vilnius
Despite its new Baltic gas auctions, Russian giant Gazprom is continuing to manipulate the Lithuanian gas market, according to Lithuanian intelligence.
Lithuania’s State Security Department and the so-called 2nd Department of Operative Services, part of the Defence Ministry, released the report on national threats last week. It warns: “Without proper exterior supervision, there is a probability that Gazprom will be engaging in manipulations for political reasons as before."
The report says it remains unclear how much Russian gas was acquired in the last Gazprom auction in March by the Lithuanian bidders -- Lietuvos Duju Tiekimas (LDT), Haupa and Achema -- but the total purchased is not believed to exceed 700 mn m3. This is how much Lithuania needs to add to Statoil’s 1.35 mn m3 to be delivered this year to fully satisfy the country’s 2016 gas demand. Gazprom has announced it intends to sell around 6 bn m3 of gas through auctions, which it deems as a novel and transparent form of gas sales.
According to the report, Gazprom will do whatever it can to keep its foothold in the Baltics.
“After the pullout from Lithuanian gas companies in 2014 following the completion of gas market unbundling, the Russian gas company strived to discredit Lithuania’s LNG import terminal at Klaipeda and LNG as an alternative supply source to the Russian gas. In pursuit of this, the company acted in each of the Baltic States and regionally,” the report states.
Lithuanian intelligence concludes that Russia shows “continuing” interest in Lithuania’s investments into the country’s key sectors including energy.
“Among the fields of interests were Klaipeda seaport, railway infrastructure and the grid interconnectors (with Poland and Sweden). With the possibility to import cheaper electricity from Sweden, there have been increased attempts of Russia and third parties to export the electricity from Lithuania or through the territory of Lithuania, especially taking advantage of the LitPol grid cable,” the report claims.
Russia is “very sensitive” about weakening position
According to Lithuanian intelligence, Russian authorities react to any changes in the Lithuanian energy market and the weakening of Russian companies’ positions in Lithuania “particularly sensitively” because of several reasons.
First, the report claims, because earnings from energy remain Russia’s main resource of financing of the country’s pivotal state projects and the main tool to secure stability in the country. Second, Russian dominance of the energy markets in the post-Soviet bloc enables it to retain or even expand influence. “During conflicts, Russia may use, and in fact often uses, countries’ dependence on Russian energy resources and infrastructure as one of the key tools of non-military clout,” the report says.
The report's authors insist that, despite Russia’s attempts to diversify gas export, Europe will remain Russia’s main export market.
Ongoing infrastructural, financial and legal changes in the Baltic region, especially in Lithuania, are seen by the Russian authorities as an additional threat to Russia’s security especially given that the country’s enclave of Kaliningrad, is dependent on energy resources transiting a NATO or EU states.
The report claims that, with an increasingly competitive Baltic energy market, countries previously controlled by Russia in the past now demand equality of treatment with Russia when it comes to energy trade. Russia nowadays, the report emphasises, more often finds itself in a position where it struggles to deter its former satellite states from embracing energy alternatives and implementing reforms.
“With Russia’s weakening possibilities to apply energy leverages against them, the significance of military measures and the likelihood of their appliance in the regions increases significantly,” the report says, referring to the conflict in Ukraine as the prime example.
According to the report, Russia endeavors to slow down the EU energy integration process by discrediting the idea of an EU common energy union and targeting individual EU countries with profitable energy projects.
Energy security-wise, Estonia looks best, Latvia is in worst position
Approached by Natural Gas Europe, Gediminas Grina, former director of Lithuania’s State Security Department, told that Russia “along with some other states” did impact, does impact and will exert clout on Lithuania’s different economic activities.
“However, as the former chief of the Department, I can neither affirm nor refute that Russia did affect the Klaipeda LNG terminal,” Grina told.
To reduce or eliminate opportunities for Russia to impact its energy sector, Lithuania needs to integrate its energy system as well as other pivotal infrastructure into the EU’s as fast and as deeply as possible, he insisted.
Reinis Aboltins, a researcher at Latvia's Center for Public Policy, Providus, notes that because Latvia has struggled with gas market liberalisation for a number of years, lagging behind other Baltic states in this regard, so is especially susceptible to energy security threats.
“Although the regulatory framework has improved over the last year, incumbent Latvijas Gaze is not embracing change at all. Instead it is showing lack of willingness to allow third-party access (TPA) to transmission and storage, and continues arguing with the biggest natural gas consumers in Latvia,” Aboltins told NGE. Latvia is the Baltic gas market's weak point as it has not fully implemented the EU's Third Energy Package including TPA, he said.
Although Latvijas Gaze shareholders have approved plans to unbundle its network and reform the business in line with Latvian energy law, its individual shareholders, Aboltins insists, have been “very active” over the last three years trying to derail the whole liberalization process.
“From the perspective of energy security in the Baltic Republics, Lithuania is most secure. Estonia is in a better situation thanks to its more diversified energy portfolio and limited use of gas. Lithuania is heavily reliant on gas but has made the most progress with gas market liberalisation,” the analyst stressed. It did so by implementing TEP and, secondly, by putting infrastructure in place that delivers additional or alternative gas supplies.
“To sum it up, Estonia is the least pre-disposed and best secured and Latvia is the most pre-disposed and least secured,” Aboltins told.
Flows of Russian capital need scrunity too
Olevs Nikers, an Estonian-born security expert and international affairs Fulbright Scholar at Texas A&M University's Bush School of Government and Public Service, underlines too that “vulnerabilities” in the Baltic energy market still exist.
“Especially they are visible in Latvia’s gas sector. Latvia lags all the three Baltic States in terms of energy security and is still very dependent on Russia," Nikers said. He points to Latvijas Gaze's shareholder structure in which Russian firms Gazprom (34%) and Itera (16%) still hold half the equity; the other half is owned by EU-backed Marguerite Fund 28.97%, Germany's Uniper 18.26% and others 2.77%.
He says that the “likelihood” that Russia can push on the “energy triggers” to pursue its own political goals is “very high.”
“Besides, the flow of the Russian financial capital into Latvia through the natural gas market assets can be used for political cause, for example, financing certain political parties and pro-Russian leaders in the country. Only liberalisation of gas market can change the situation in Latvia,” Nikers emphasized to NGE.
Linas Jegelevicius