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Lithuanian energy issues provoke cries from Putin

  • 2010-12-02
  • By Rokas M. Tracevskis

VILNIUS - On Nov. 26, Russian Prime Minister Vladimir Putin, speaking at a German business forum organized by the German newspaper Suddeutsche Zeitung in Berlin, verbally attacked Lithuania and the emerging EU common energy policy, accusing Lithuania and the rest of the EU of trying to keep Russian energy companies away from too deep involvement in the EU market. He complained that in the 1990s, the Lithuanian-state owned oil refinery in the Lithuanian town of Mazeikiai was sold to the American Williams International Company, not to the Russians, due to political reasons. However, Putin was especially angry about the current Lithuanian government plan to take back, under Lithuanian state control, the gas pipelines in Lithuania. Vilnius’ move is based on the new EU legislation, known as the Third Energy Package. Putin’s cries in Berlin were shown on Russian TV channels, which are strictly controlled by the Kremlin.

“Since the times of the French revolution, it was a principle that the law cannot be applied backwards in time. Our company [Russia’s state-controlled gas giant Gazprom], together with German partners [Germany’s E.ON Ruhrgas], legally acquired distribution assets in Lithuania. Now they are being thrown out there with reference to the Third Energy Package. What is this then? What is this robbery?” Putin asked rhetorically in front of the audience of German businessmen.

The Third Energy Package means the following: in March 2009, the EU decided to liberalize the energy markets of EU member states by splitting gas suppliers from distribution network ownership, ensuring that small gas suppliers can get unhindered access to infrastructure and compete on an equal footing with the dominant players.

Putin’s KGB agent-style charm is making an impression on leaders of the individual EU member states, such as Poland and Bulgaria, but the EU bureaucracy remained calm in reacting to his cries in Berlin. On Nov. 26, the European Commission dismissed Putin’s criticism. According to The New York Times, Marlene Holzner, the spokesperson for the EU commissioner for energy, said the Third Energy Package would lead to more open and integrated markets. “That is good for competition and good for the security of supply,” Holzner said.

The Third Energy Package also includes a so-called Gazprom Clause, designed to prevent companies from outside the EU - such as Gazprom - from buying up strategic distribution networks without approval by EU member state governments. Lithuania decided to start implementing the package’s requirements immediately and Vilnius is supported by the European Commission, while Finland, Estonia and Latvia asked the European Commission to postpone the implementation of the package’s requirements in their countries and received permission from the European Commission for such postponement. This is why Gazprom decided to sell gas to Lithuania at a higher price than to Finland, Estonia and Latvia in 2011.

Lithuania also causes other problems for Putin’s beloved geopolitics-related Russian energy sector business. Lithuania plans to build an LNG terminal on its coast by 2014. Lithuania plans to build a new nuclear plant. According to the media, the reactor will come from the South Korean company KEPCO, because the French may have been scared away by the Russians, if one reads between the lines of public suggestions by Lithuanian Prime Minister Andrius Kubilius. The U.S. stated to Vilnius, via its ambassador to Lithuania, that the Americans are ready to help in both of these two projects, at least on the consulting level. The possibility that Lithuania might allow landlocked Belarus to build its LNG terminal near Lithuania’s shores causes even more headaches in the Kremlin.