Energy Shortages In The Baltic Sea Region
For this first Global Blackout issue, we’re going to look at a part of the world that doesn’t get much attention: the Baltic states of Estonia, Latvia, and Lithuania. I traveled to the area in 2006 to meet local business leaders, government representatives, and to gage just what opportunities could come from a free and prosperous Baltic Sea region.
Formerly part of the Soviet Union, these three states have had their own periods of prominence throughout history-Lithuania was actually the largest country in Europe in the 14th century, and the Estonian and Latvian capitals of Tallinn and Riga were key outposts of the Hanseatic Trade League (German airline Lufthansa is named for that important alliance).
With one dot of Russia known as the Kaliningrad region (formerly East Prussia), Moscow does lay claim to part of the Baltic Sea coast.
Yet the independence of most of the Baltic region is politically complete.
No one challenges that any of the three Baltic states is still part of Russia…
But Russia still wields a strategic advantage in the form of energy.
In recent years, Estonia, Latvia and Lithuania have become members of the European Union, even coming close to accession to the European Monetary Union.
As part of its EU membership, Brussels has urged Lithuania to close a Soviet-era nuclear reactor at Ignalina. The reactor is from the same technological vintage as the one at Chernobyl that caused history’s worst nuclear power accident, so you can understand why Europe is skittish.
Nowadays, though, power supplies are squeezed, and so is money. The Baltic states are trying to wean themselves off of Ignalina’s power with ties to Finland and the Nordpool grid to the north, but it’s slow going.
Many Lithuanian politicians say the Ignalina reactor has more than a decade of life left. Lithuanian Prime Minister Andrius Kubilius told Reuters this week that closing Iglalina in 2009 may leave Lithuania at the mercy of electricity imports from Russia.
Lithuania supported Georgia this summer in that former Soviet Republic’s fight over separatist Caucasus regions loyal to Moscow.
The threat of Baltic energy shortages means greater tendency to reliance on Russia, which in turn gives the Russian leadership economic and political leverage. Russia has handled its natural gas and electricity exports heavily against Belarus and Ukraine in the past few years.
As the Reuters piece stated:
Asked if Russia might put pressure on Lithuania, knowing the country have almost nowhere else to buy electricity from, Kubilius said: “We cannot avoid such thinking.”
“I hope Russia will avoid such mistakes. We hope for real EU solidarity … We cannot change the behaviour of Russia, we are too small,” he added.
Swiss power and automation systems provider ABB (NYSE:ABB) is the main contractor on the Estlink project, which would hook the Baltic and Nordic power grids together.
ABB is well-positioned to profit from shifting energy alliances with link-ups around the world.