The energy supply of the Baltic States has been inextricably linked to that of Russia for a long time. However, one is now equipped in the face of Moscow's gas-related power games.
After declaring their independence from the Soviet Union in 1991, the Baltic republics of Estonia, Latvia, and Lithuania became independent states. It took another three decades for the United States to achieve energy independence, which is to say, separation from Russia's energy infrastructure and the Russian market. In fact, even after the Baltic States became members of the European Union in 2004, they were correctly referred to as a "energy island" within the EU: they were members of the Union in many ways, but not in terms of their energy infrastructure. In the aftermath of the Soviet occupation, the gas and electricity infrastructure and markets in the Baltic states remained tightly intertwined with those in Russia. As a result of the scarcity of domestic natural gas supplies, the energy industry was especially susceptible.
In the Baltic States, the discussions over energy security and independence are very complicated. For example, it is well-known that the three countries are vulnerable, and that Russia poses a significant risk to their stability and security. True energy independence, on the other hand, would be impossible to achieve without significant investment and reform in infrastructure. Natural gas was supplied at a supposedly low price and on a long-term basis by Russia, as Russia and Russia-affiliated companies in the Baltics have frequently pointed out. So far, such arguments have received acceptance.
Lithuania has always been the Baltic state that has been most devoted to energy security and independence. Vilnius also made one of the most significant strides toward establishing an autonomous energy infrastructure in the country. On January 1, 2014, the port of Klaipda welcomed the first shipment of liquefied natural gas (LNG). At the core of the terminal is a floating storage and regasification plant placed on a ship of 300 meters in length. Independence is the name of this character. Nonetheless, Lithuania made this choice on its own, after the failure of the country to achieve an agreement with Latvia and Estonia on the building of a combined terminal co-financed by the European Union. While the Baltic States are believed to be similar in many ways and to be near in many others, this made it evident that they might become rivals in terms of economic and material considerations.
Almost eight years after it first became operational, the LNG terminal in Klaipda continues to be the only infrastructure project in the Baltic States that is technically capable of supplying natural gas to the domestic market of Lithuania, as well as to the markets of the other two Baltic States and beyond, all the way to Finland. Starting in 2020, the plant will be linked to the Estonian power grid by the Balticconnector pipeline, which is being co-financed by the European Union. A gas pipeline between Lithuania and Poland, known as the GIPL (Gas Interconnection Poland-Lithuania), has been progressively putting into operation since May 1st. It links the Baltic States to the rest of the European Union via Poland. As a result of EU-wide natural gas market liberalization, new players have been able to enter the market and, as a result, the dominance of Russian-linked corporations has been diminished.
Lithuania was able to declare in April of this year that it will cease all imports of Russian natural gas as a result of the construction of the LNG terminal in Klaipda. Estonia followed suit and stated that it will cease importing Russian natural gas by the end of the year, citing national security concerns. The Estonian government hopes to commission a new LNG port in Paldiski by the start of winter 2022, in collaboration with Finland, which already has its own LNG facilities.
While all of this is going on, the demand to adopt such actions is mounting in Latvia. By the end of 2022, the government coalition decided to phase down the importation of Russian natural gas, which took effect in early April. Aside from participating in the mentioned Estonian-Finnish LNG project in Paldiski, Latvia also aims to support the development of an LNG terminal on its own territory. Skulte and the Latvian capital Riga are two possible locations. The construction of such a facility would most likely be finished by 2023 or 2024. Unsurprisingly, one of the most strident opponents of the phase-out of Russian natural gas imports is Latvijas Gze, a former monopoly that has a stake in the industry. Gazprom is the second-largest stakeholder in the company. According to the firm, a total restriction on imports would result in price increases and potentially an energy catastrophe..
The transition away from Russian natural gas will, however, be fraught with difficulties in the short term. The LNG port at Klaipda does not have the capacity to fulfill the needs of all three Baltic countries. While this is going on, the Russian government's decision to restrict gas shipments to Poland is expected to ratchet up competition for LNG supply capacity in Europe. In the medium future, therefore, a great deal will be dependent on the LNG facilities that are now under construction.
As a result of Russia's invasion of Ukraine, the Baltic States have moved even farther away from the Russian Federation. This holds true for the provision of energy as well. In all three nations, the total decoupling of Russia's natural gas infrastructure from the Russian market seems to be just a matter of time. Once upon a time, the Baltic nations were the countries most endangered by Russia's policy of weaponizing energy exports. Today, the Baltic states are among the most vulnerable countries in the world. They might be among the first to develop immunity to this in the near future.
The author Māris Andžāns is Director of the Center for Geopolitical Studies in the Latvian capital Riga.