tl;dr All Baltic countries oppose the construction of the NS2 project, due to distrust of Russia on the grounds of national and energy security, as well as wanting to diversify their energy supply.

My task this week was to conduct further research into the Baltics states and V4 countries, and map out reasons for their opposition to the Nord Stream 2 (NS2) project as well as their current energy policies to provide a better understanding of these countries’ collective and possibly even individual positions.

This post will be the first of two, focusing on the Baltic states. The next post will focus on the V4 countries.

Baltics position: Reasons for opposition

As stated in my previous blog post, both the Baltic states and V4 have come out in opposition of the Nord Stream 2 project. The Baltic states, in particular, state the reason for their opposition as the project not being economically viable, instead being political. They also highlight that the project is not in line with the objectives of the energy policy of the EU and does not contribute to “EU’s energy independence and diversification of suppliers.“

Overall, the three states seem to share similar opinions and reasons for opposition to this project, highlighted below.

Estonia:

Oppose due to geopolitical reason for project, not economic. “It is leverage for Russia to intervene in European politics.” Estonia’s Foreign Minister has said that they are concerned with how Europe’s general dependence on Russia is increasing, as well as how Russia uses their gas supply to “achieve political impact in other matters”.

Latvia:

Latvia’s Foreign Minister has stated that the NS2 project threatens to increase dependence on a single gas supplier, which contradicts the principles of the Energy Union. This, in effect, is them voicing out concern over increasing dependence on Russia.

Lithuania:

Lithuania has made joint statements with Poland and Ukraine to voice their opposition to the NS2 project, on the grounds of energy security and increasing Russia’s political leverage.

Why?

While the Nord Stream 2 pipeline will be laid in the Baltic Sea, it does not pass through the exclusive economic zone (EEZ) nor territorial waters of any of the Baltic states. As such, despite their opposition, these states do not have any leverage on influencing the decision of the project.

One main reason for the opposition to the NS2 project by the Baltic states is clearly due to the involvement of Russia in the project. Until they began addressing their dependence in the past few years, the Baltic states depended on Russian gas for energy supply. This was due to the fact that these three countries were part of the former USSR and thus inherited their gas structure from the Soviet Union. Due to the constraints imposed by this infrastructure, until recently, the Baltic states depended almost entirely on Russia for their natural gas imports, paying some of the highest prices in Europe. This situation meant that the Baltic states were susceptible to gas cut-off and had little diversity in their gas supply.

In fact, up till recently, Gazprom (Russia’s state-owned energy company) maintained a considerable stake in the natural gas companies of the Baltic states, owning 37% of Estonia’s Eesti Gaas (with a further 10% was owned by another Russian gas company, ITERA), 34% of Latvia’s Latvias Gāze (16% also owned by ITERA), and 37% of Lithuania’s Lietuvos Dujo at the point of its greatest involvement in 2014. These ownership levels gave Gazprom considerable say in the policies and strategies employed by these companies.

Since independence, the Baltic states have worked to improve their connections to Europe and move away from their past ties with the former Soviet Union. It seems that the Baltic opposition to the NS2 project is because of their concern over what an increased reliance on Russian gas would bring. Indeed, Russia has actually cut off gas supply to a Baltic country once – Estonia, in 1993. This was in response to Estonia’s passing of a law that required non-citizens— who at the time were primarily ethnic Russians—to apply for residency or leave the country within two years. As can be seen, while it was “only” done once, there is a precedent for Russia to use its position as an energy supplier for political leverage. It is for this reason that there are currently plans to diversify gas supply in the Baltic states, as detailed in the next section.

Other reasons that have been stated as grounds for opposition is the threat to energy security and lack of energy diversification that this project brings. While both of these reasons bring with them associated issues, the underlying theme that ties them together, ultimately, is the relationship with Russia. It is likely due to this reason that there is Baltic opposition to the NS2 project.

Russian response:

As a side note, Russian response to the Baltics’ opposition has been largely derisive. Aleksei Pushkov, Chairman of the Foreign Committee of the Russian State Parliament (Duma) has commented before that Estonia has no claim on anything and that nobody was interested in Estonian opinion, in a tweet directly concerning that very opinion.

Baltics: Current Energy policy

To frame the above discussion, this section will focus on the current energy policy of the Baltic states, specifically with their natural gas supply.

Lithuania, which consumes more gas than Estonia and Latvia, was the first to combat the region’s dependence on Russia. It did so first by leasing a floating gas storage platform from the Norwegian shipping company Höegh LNG and began construction to connect the floating terminal to their gas network. At the same time, state-owned gas company Litgas also signed a contract with the Norwegian gas supplier Statoil to import gas from Norway. This, coupled with additional contracts from other Lithuanian gas companies resulted in Lithuania importing more natural gas from Norway than Russia in 2016.

The EU has also provided significant funding for the Baltic Energy Market Interconnection Plan (BEMIP), an EU initiative intended to facilitate the integration of the Baltic energy market into Europe. Two projects, the Balticconnector pipeline between Estonia and Finland, and the Gas Interconnection Poland Lithuania, have been the recipients of this funding. Completion of these projects would bring the Baltic states into the European gas network and bring diversification via better connections to Europe.