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Baltics plan to shatter Soviet “energy ring”

  • 2015-10-07
  • By Richard Martyn-Hemphill

VILNIUS - The Baltic States are planning to sever ties with BRELL — a Soviet designed “energy ring” linking Belarus, Russia, Estonia, Latvia, and Lithuania — breaking the Baltics away from an agreement signed between the five countries back in 2001.
The move would leave Russia and Belarus to spend millions rewiring their electricity systems, effectively shutting off the Russian enclave of Kaliningrad from energy supplies as the Baltics lock in their grids with the rest of the EU.
Estonia, Latvia, and Lithuania have been investing money themselves in energy linkups in recent years — backed heavily by the EU’s Connecting Europe fund. They see EU integration as a means of diversifying their energy supplies, curbing their dependence on Russian energy sources.

The spectre of having to compensate Russia and Belarus looms large, however, and the timeframe within which the Baltics will cut the ties remains unclear. “I cannot say when it will be implemented,”  said Lithuanian Prime Minister Algirdas Butkevicius, speaking to Lithuanian national radio. “It is planned for 2024. I do not think negotiations on the matter will be between companies, but instead between the EU and Russia with Belarus.”
But the negotiations will prove testy, especially if relations between Russia and the EU remain as frosty as they have been since the Cold War — how much compensation  do Russia or Belarus deserve for having to rewire hundreds of miles of power transmission lines?

Russia has watched on in consternation over the last 12 months as extensive EU energy link-ups have gotten underway in the Baltic Sea region, especially the underwater NordBalt electricity cable that will integrate Lithuania’s electricity grid with Sweden’s and will be completed in the next few weeks.
During a recent interview with the US TV channel CBS, Putin expressed dismay and alarm at the process of integrating Nordic-Baltic energy networks with central and western Europe’s.

“In practice, it means that a number of zones will emerge between several regions of the Russian Federation, where we will have no power transmission lines, since previously we used to have a loop transition through the Baltic countries,” he said in conversation with TV presenter Charlie Rose. “And it means that we will have to reform the system, spending billions of dollars, as well as our European partners who will also have to spend billions of dollars to integrate the Baltic countries into their power grid. What for?”

The EU’s Baltic Energy Market Interconnection Plan (BEMIP) presses on irrespective, aiming to create operating and integrated markets for electricity and gas and to secure energy infrastructure in order to establish a competitive, sustainable, and secure energy market in the Baltic Sea region.

A report released in advance of an EU energy meeting last October underscored that Baltic electricity systems synchronously interconnected with the power systems of Belarus and Russia — operated on the basis of the BRELL agreement — constitutes an obstacle for the progression of other tasks, such as electricity congestion management, balancing, and intra-day market developments.

With the Baltic States’ power systems still synchronically operating through BRELL, certain key parameters of the Baltic systems would remain centrally-controlled by Moscow — a dependence Baltic politicians have been keen to get away from ever since the collapse of the Soviet Union back in 1991.

Some politicians fear Russia would be within its rights to ask for money. “There is such talk,” Gediminas Kirkilas, chairman of the Lithuanian parliament’s European Affairs Committee, told Lithuania’s public TV channel. “A study has even been carried out,” he adds, referring to the potential costs of moving away from BRELL. “It gives somewhat lower figures than those mentioned by the Russian president. It speaks about a billion euros or so … I would not rule out that the EU might make efforts to persuade us to compensate for the exit.”

Under effective agreements the Baltic States are not obliged to pay compensation to Russia or Belarus in the event of the desynchronization of their power systems, the Estonian transmission system operator Elering says.
“From the agreements in effect in the common electricity system today, no kind of compensation obligation arises. There is the information obligation, and we’ll certainly do it in good time so the Russians can prepare the operation of their network for desynchronization of the Baltic States’ power systems,” chief of communications at Elering Ain Koster told BNS.

“Decoupling the Baltic States’ electricity systems from the Russian system is our strategic goal. Today we’re preparing a study to deal in detail with different technical solutions both for desynchronization of the Baltic States and for the operation of the local electricity network independently of the Russian system in the future. Basing on this study, we first have to reach an agreement in the European Union on the future operation of the Baltic electricity system. Thereafter we can start talks with Russia and Belarus,” Koster added.

Furthermore, the former CEO of Lietuvos Energija, Lithuania’s energy company who signed the effective BRELL agreement on behalf of Lithuania 14 years ago, said that Lithuania and the other two Baltic countries will not have to compensate Russia or Belarus for any damage or losses if they withdraw from the so-called BRELL energy ring.
He pointed out that what the countries have to do is give Russia and Belarus advance notice and guarantee that if an accident occurs, this will not affect their systems and that the exiting countries will not use the energy reserves of the remaining countries.

Under the document signed by the three Baltic countries, Russia, and Belarus back in 2001, a party withdrawing from the agreement is not obliged to compensate for any losses.
According to the current wording of the agreement, “the termination of the agreement (if notice is given six months before its expiration, by Feb. 7 every year -- BNS) is not considered to be causing damage or loss, and neither party shall have the right to demand compensation from the other parties for any damage and/or loss.”

The wording of the agreement was amended several times before 2010.
Dangiras Mikalajunas, who is now the head of the Belgian office of Russia’s electricity giant Inter RAO UES, says that the talk of possible compensation for huge losses is a misunderstanding.
“It seems to me like some kind of misunderstanding or human ignorance. That BRELL agreement is a technical agreement signed at a time when no other conditions were available. Incidentally, we signed it a year later than the Estonians and Latvians did and put the entire system into an awkward situation,” the former CEO of Lietuvos Energija told BNS.

“As to losses, it is clearly written that the countries have to negotiate on an exit to ensure that none of the parties is harmed. What was meant was that if a party withdraws, then it probably has to provide guarantees that the neighboring systems will not be affected in case of an emergency,” he said.