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Home Publikacijos Lithuanian Energy Security in the Light of EU – Russia Energy Dialogue

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Cooperation attempts

Agreements, institutionalization

The Energy Charter Treaty (ECT) was an international agreement that was originally based on integrating the energy sectors of the former Soviet Union and Eastern Europe at the end of the Cold War into the broader European and world markets. The original European Energy Charter was signed in 1991 and contained a declaration of principles for international energy including trade, transit and investment. The Energy Charter Treaty was signed in 1994 and came into effect in 1998. To date the Treaty has been signed or acceded to by fifty-one states plus the European Communities. A distinctive feature of the Energy Charter Treaty is that it provides a set of rules that covers the entire energy chain, including not only investments in production and generation but also the terms under which energy can be traded and transported across various national jurisdictions to international markets.

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Divide and conquer

The German case

As has been mentioned before, one of the elements of the Russian strategy has been to pursue bilateral agreements with individual EU member states rather than deal with Brussels. Gazprom has identified a series of ‘strategic partners’ and entered into bilateral deals with individual countries. It has tended to avoid dealing with the EU as a whole. When dealing with the security of smaller states such as Lithuania, the ones that are completely dependent on Russian imports and are not yet fully integrated into the European pipeline system nor electricity grid, the fact that Russia is advocating bilateral deals should be a sign of trouble in paradise. According to some analysts, Russia is trying to use its special relationship with Germany to drive a wedge between Poland and the Baltic States, on the one hand, and Germany, on the other.

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Lithuania - global and regional challenges

The history of energetics in Lithuania starts in 1892, when during Easter in April the first electric light bulb was lit in the estate of Bogdanas Oginskis. Now the 17th of April is known as the day of energy in Lithuania.
Lithuania is considered to be an energy intense country and at the same time due to its Soviet legacy it is one of the least energy efficient states in the European Union. As can be seen from the graph below, Lithuanian energy intensity is much higher than the EU average and only Estonia, Bulgaria and Romania use more energy. The Lithuanian government has already launched several initiatives to improve energy intensity hoping that this would help enhance state’s economic performance. For Lithuania improving energy efficiency and reducing its intensity is not just a question of finance – it is also an issue of its dependence on Russia.

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North European Gas Pipeline

The Nord Stream

In February 2003, Russia and Germany proposed the idea of a North Baltic pipeline extending over 2,000 miles (700 of them underwater) from Russia to Germany via the Baltic Sea. In January 2004, the Russian government issued an official decree in support of the pipeline’s construction, and several European oil and natural gas concerns have shown interest in the majority-Gazprom project. Construction began on December 9, 2005. The North European Gas Pipeline Company (North Trans Gas) has been registered in Zug, Switzerland, to build the pipeline’s submarine section. Former German Chancellor Gerhard Schroeder, who signed the initial agreement with President Putin for construction of NEGP, is now chairman of the NEGP consortium—a fact that caused an outcry in his home country. The Baltic Pipeline was agreed by Gerhard Schröder in his last two weeks in office, and then he almost immediately became its chairman. He had developed a deep personal relationship with Putin (Putin had gone as far as to find two orphans for the Schröder family to adopt).

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Lithuanian energy security challenges

As can be seen from the chart below, nuclear energy, produced at the Ignalina power plant, contributes almost 37% of the total energy needs. Natural gas makes up about a quarter of total consumption, oil and its product make up another 25%.

 Consumption of primary energy sources in Lithuania

Consumption of primary energy sources in Lithuania

 

All natural gas and almost all amount of consumed oil are also imported from Russia. Risk for Lithuania’s economy is intensified by the fact that Lithuania has no considerable internal or renewable energy resources: domestic and renewable sources meet only 10 percent of its energy demands (extremely limited oil reserves are estimated at only 1.63 million tons) The threat for Lithuania‘s economic stability lies in its dependence on Russian companies. Therefore the threats and challenges Lithuania faces dependence on the single supplier of energy resources, Russia, in a way this supplier is unpredictable and supply cannot be considered as completely stable; high energy intensity and too high dependence of the national economy on energy resources; monopolisation of the energy sector and vertical integration, particularly if the energy supplier is the subject of control; dependence on the vulnerable energy infrastructure, since so far Lithuania is not integrated with the European networks. The other challenge is that Lithuania does not have threat-neutralising measures.

Thanks to Ignalina nuclear power plant Lithuania is currently able to export electricity to Latvia and the Kaliningrad exclave region of Russia. Iganalina produced over 10.34 terawatt-hours (TWh) of electricity in 2005, which accounts for more than 70% of Lithuania’s total production that year. Although the Ignalina reactors are of a safer and more advanced design than the ones that were in Chernobyl, they are still far from perfect. Since there is a possibility of an accidental meltdown, the EU requested that Ignalina be deactivated upon Lithuania’s accession. The first reactor at Ignalina’s reactors was shut down on December 31, 2004. The second was allowed to remain active until the end of 2009 in order to allow Lithuania time to secure alternative means of energy production, presumably through the construction of a newer, safer plant. Without the nuclear plant Lithuania will have to rely on thermal power plants which require fossil fuels to generate its electricity. This poses a large dilemma for Lithuania, since the country is completely disconnected from both the larger European electricity network (UCTE) and the Nordic electricity network (Nordel). Since electricity will have to be generated by fossil fuels, the closing of Ignalina will lead to a dramatic increase in demand for oil and gas—and, if no steps are taken to diversify import supplies, to further reliance on Russia.