Paying the Gas Piper

The Baltic states, overwhelmingly dependent upon Russian energy supplies, experience most directly the high costs of their neighbor’s political pressure on the EU. Paul Hockenos wonders if diversification including renewables could provide these countries some relief.

(Photo by khrawlings, CC BY 2.0)

(Photo by khrawlings, CC BY 2.0)


Which country pays the highest price for natural gas in all of Europe?

I certainly wouldn’t have guessed it before I went to Lithuania last week. But any taxi cab driver, bartender, or student in the capital city of Vilnius can tell you that Lithuanians, who are nearly 100 percent dependent on Russian gas, have the continent’s worst contract with Gazprom. They pay 30 percent more than people in other EU member states. Even compared to its Baltic neighbors Latvia and Estonia, Lithuania is getting screwed: Gazprom charges it 13 percent more than it does Estonia and 20 percent more than Latvia. It’s so bad that Lithuania has initiated an EU investigation into its contract’s terms. (Lithuania is demanding back €1.67 billion of claimed overcharges.)

But the terms of its dependency on Russia aren’t going to change anytime soon. Lithuania, Latvia, and Estonia are all at Russia’s mercy, more so than any other region in Europe. They’re anxiously eying EU and US sanctions, worried that their fragile economies might be upended in the process, long before Russia feels any pain.

The Baltics are well aware of their vulnerability. Russia has a history of tampering with their energy supplies, temporarily halting supply or obstructing cross-border trade just to remind them who’s boss when it comes to energy.

This is why the Baltic countries doubled down on efforts to diversify suppliers in the aftermath of the Belarus (2006) and Ukraine (2009) crises. Lithuania, for example, began construction of a new liquefied natural gas terminal at the Baltic Sea port of Klaipeda, which will enable it to import gas from anywhere in the world at competitive prices. It’s not ready yet, but should be later this year. Others are being planned. Lithuania is also in the process of better linking its grid to the Polish and Swedish electricity grids. It is currently still part of the old Soviet grid system.

In Vilnius, I talked to Saulius Piksrys, director of the Lithuanian Wind Power Association. He said there’s not much Lithuania can do in the short run to change the equation. Some of Lithuania’s political elites still dream about resumption of the nuclear program, which the EU made them shut down for safety reasons. But cost makes this extremely unlikely.

Lithuania has tremendous wind potential, says Piksrys, which any visitor to the country notices immediately. There were icy, gale-force winds blowing through Vilnius’s old town when I was there. And the conditions for offshore installations in the much shallower Baltic Sea are significantly better than in the North Sea. Studies show on- and offshore wind farms could generate 50 percent of the country’s power, much of it in existing cogeneration stations. Add other renewables to the mix, he says, and 80 percent is not out of the question.

But what could Lithuania do if Russia halted gas supplies tomorrow? “Not much, almost impossible,” answered Piksrys. Indeed, the Baltics’ extreme energy vulnerability is an Achilles’ heel of EU energy security.

by

Paul Hockenos

Paul Hockenos is a Berlin-based journalist and author of the Going Renewable blog.

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