Foreign Policy Research Institute A Nation Must Think Before it Acts The Baltic Road to Energy Independence from Russia Is Nearing Completion
The Baltic Road to Energy Independence from Russia Is Nearing Completion

The Baltic Road to Energy Independence from Russia Is Nearing Completion

Estonia, Latvia, and Lithuania regained their independence from the Soviet Union in 1991. Reaching energy independence—i.e., disentanglement from Russia’s energy infrastructure and market—will have taken more than three additional decades. Even after all three countries joined the European Union in 2004, the Baltic states were still rightfully considered an energy island within the European Union. Instead of connections to the West, Baltic natural gas and electricity infrastructure and markets were largely intertwined with those of Russia, a legacy of the Soviet occupation. Without indigenous natural gas sources, this energy sector was particularly vulnerable to energy weaponization by Russia.

The debates on energy security and energy independence have been rather complex. On the one hand, the Baltic vulnerabilities and risks posed by Russia have been well known. On the other hand, energy independence would not come without significant investment and reforms. As often echoed by Russia and companies with ties to Russia in the Baltics, the eastern neighbor provided energy resources at an allegedly reasonable price, and on a long-term basis. Russian politicians occasionally threatened the Baltic states with ominous consequences should Russia stop its deliveries. Such arguments often resonated.

Among the Baltic states, Lithuania has traditionally been the most vocal on energy security and independence. Taking one of the first bold steps towards natural gas independence in terms of infrastructure, in 2014, Lithuania launched a liquified natural gas (LNG) terminal in the port of Klaipėda with a floating storage and regasification unit named Independence at the core. The Klaipėda terminal was a unilateral decision, after unsuccessfully wrangling with Latvia and Estonia over building a common EU co-funded terminal. This episode highlighted that the Baltic states, though most like-minded and close in many ways, tend to compete when it comes to material factors.

Almost eight years after the launch of the Klaipėda LNG terminal, it remains the sole such infrastructure object in the Baltic states, technically capable of supplying natural gas to the domestic Lithuanian market, as well as to the other two Baltic states and Finland. Finnish and Estonian networks are connected by the Balticconnector pipeline, which has been running since 2020. The newly minted Gas Interconnection Poland-Lithuania pipeline between Lithuania and Poland, which started operations in May 2022, also links the Baltics to other EU countries at large. In addition, the liberalization of the natural gas market in the European Union has opened its markets to new players, as well as reduced the clout of Russia-linked companies.

The existence of the Klaipėda LNG terminal allowed Lithuania to announce in April 2022 the complete abolishment of the import of Russian natural gas. Estonia also followed suit by announcing its intention to stop imports of Russian natural gas by the end of the year. In cooperation with Finland, which already has its own LNG facilities, Estonia aims to launch an LNG terminal in Paldiski before the winter of 2022 arrives. Pressure to adopt similar measures mounted also in Latvia. The governing coalition agreed at the beginning of April that the import of Russian natural gas will cease by the end of 2022. At the end of the month, the Parliament also conceptually backed the move.

One of the most vocal opponents of the ban on Russian natural gas, unsurprisingly, is Latvijas Gāze (Latvian Gas), a former monopoly still co-owned by Gazprom. It suggested that a complete ban on Russian gas would raise prices and even lead to an energy crisis. Currently, however, Latvia has sufficient stores of natural gas to last several months at the Inčukalns underground storage facility.

The Latvian government also decided in April that an LNG terminal should be built in Latvia. Options for the terminal location include Skulte and Rīga and one could be ready in 2023 or 2024. The Ministry of Economics is currently conducting market research, and by the end of May it will submit a comprehensive review and proposals for the way forward.

The short-term road away from Russian natural gas will not be without challenges. The LNG terminal in Klaipėda will not be able to accommodate full demand for all three Baltic states. Furthermore, Russia’s recent decision to stop gas deliveries to Poland is likely to increase competition over LNG delivery capacities in the region. Therefore, much will depend on the Baltic LNG facilities that have yet to be built.

Compared to natural gas, the debates about disentanglement from Russia’s electricity infrastructure have been less contentious and less prominent. Naturally, more attention has been paid to the spike in electricity prices. In this sector, the Baltic states have also come a long way from Russia. Two interconnections were built between Estonia and Finland: EstLink 1 was completed in 2006 and EstLink 2 in 2014. The following year, two additional interconnections between Lithuania and other EU member states were completed. The first was the NordBalt underwater cable connecting the electricity grids of Lithuania and Sweden. The second was the LitPol Link connecting Lithuania and Poland. Another, the Harmony Link, is expected to connect Lithuania and Poland under the Baltic Sea by 2025.

Like the natural gas market, the liberalization of the electricity market in the EU dismantled monopolies and opened the market to new players. Despite physical connections and an open market, the Baltic states still operate as a part of the BRELL (Belarus–Russia–Estonia–Latvia–Lithuania) ring, technically part of Russia’s power system. Thus, the Baltic electricity grids are still in sync with that of Russia, and Russia can influence electricity flows in the Baltic states.

In 2018, a plan by the Baltic states, Poland and the European Commission was agreed to disconnect the three Baltic states from BRELL and synchronize them with the Continental European Network by the end of 2025. This process is more complex than it might seem, involving costly and complex upgrades of Baltic external interconnections and their own power grids.

As the war rages in Ukraine, calls have been made for an acceleration of synchronization with the European network. However, this will require the completion of the Harmony Link and other technical upgrades in the Baltic states to ensure a complete and safe synchronization. If the Baltic states or Russia decided to desynchronize from one another earlier, the Baltic grids would probably be able to operate separately before they are ready for synchronization with the European network.

Russia’s war in Ukraine has pushed the Baltic states even further away from Russia. Although notable challenges still lie ahead, disentanglement from Russia’s natural gas and electricity infrastructure and market in the three Baltic states is only a matter of time. The Baltic states, once among the most vulnerable to Russian energy weapons, will have become among the first to become immune to them. In doing so, the Baltic states will also help to turn the tide of the energy dependence of the EU on Russia.

The views expressed in this article are those of the author alone and do not necessarily reflect the position of the Foreign Policy Research Institute, a non-partisan organization that seeks to publish well-argued, policy-oriented articles on American foreign policy and national security priorities.