Gazprom's tried-and-tested tactics spur Baltic spat

By bne IntelliNews April 6, 2012

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Gazprom's strategy to divide and conquer has served it well across the EU, and looks to be continuing its success in the Baltics.

On April 5, Lithuanian Prime Minister Andrius Kubilius sent a barbed message to neighbouring Latvia that his country's forthcoming floating liquefied natural gas (LNG) terminal would serve Lithuania only, and criticized Riga for moving too slowly to cooperate on regional energy projects because of its ties to the Russian gas company.

Responding to disparaging comments from Latvian Economy Minister Daniels Pavluts that the planned floating platform, due to go into operation in 2014-15, will not pay off for Lithuania because it has no potential to serve the region, Kubilius said his country cannot afford to wait for Latvia, and that it stands to see gas prices drop by up to 30%. "Lithuania is building a liquefied natural gas terminal for its own use, while a regional terminal cannot be constructed before 2017 because of Latvia's contracts with Gazprom," claimed Kubilius, according to Elta. "I do not know if the minister has looked at the Klaipeda LNG terminal project and seem the figures. We have estimated everything very carefully and see a realistic economic prospect to have cheaper gas. If we had such terminal now, we would pay 30% less for gas. I believe that Gazprom, seeking to retain competitiveness in Lithuania, would also try to lower the gas price. The terminal we are about to build is for our own use rather than to serve the region."

Lithuania has heavily accelerated its drive to diversify its energy sources; both Lithuania and Latvia are 100% dependent on Russian gas, and heavily reliant on its oil and electricity. Vilnius has taken a leading role in a project to build a regional nuclear power station, and is also pushing to get the Baltic electricity network hooked up to its European peers. The Baltics' recent history means that all energy networks are currently cut off from Europe, but intricately linked to former Soviet states. Vilnius is also fighting a bitter battle with Gazprom to unbundle its gas importer, Lietuvos duos.

However, a recent report by the country's security services warned that Gazprom is working hard to pick off individual companies and political leaders to help it slow progress on energy projects, which appears to replicate its tactics with the EU on a smaller scale. The stern words traded between Vilnius and Riga suggest the strategy is finding success once more.

Latvia indicated on April 2 that it plans to follow Lithuania in liberalizing its gas market, but that it will take a slower approach than its Baltic neighbour, and will open talks with Gazprom on the issue. In February, Latvia was one of eight EU member states cautioned by Brussels for failing to act on the Third Energy Package, which is a leading edge in the EU's fight to ward off Moscow's bid to increase its grip on Europe's energy markets. "Things in Latvia are moving much slower," Kubilius commented. "From what I know from the Latvian prime minister, they cannot change anything in the country's gas market before 2017 because they say they have contracts with Gazprom. That means that any plans to have a regional LNG terminal, be it in Riga, can be implemented only after 2017. We cannot afford to wait until 2017 or 2018."

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