Lithuania Wants to get Free of Energy Hegemony

By Thomas Jarvi

Till 2014 Lithuania intends to build a terminal of condensed natural gas (CNG) in Klaipeda in order to reduce the dependence of supplies from (yet the only source) Russian gas. Meanwhile Russian gas giant Gazprom loses European market rapidly, giving the way to other suppliers, for example, Qatar and is concerned about the issues of terminal construction by Lithuania.


Lithuania discussed the efficiency of the CNG terminal a long time ago, and as a result of work of the previous government a final decision was made to construct the terminal. The alternative is urgent as Russian gas gets more expensive, and Lithuania consumes much gas in heat economy. At the moment this has been affected by the line towards Russia and its policy in energy sphere (Lithuania has initiated the processes concerning gas price at European market), Lithuania pays the highest price in Europe. For example, Lithuanian consumers pay 30% more for gas than German ones. 


Lithuanian government doesn’t have great illusions that these prices shall be changed. In this respect demonstrative are the comments of the President of the country Dalia Grybauskaite and the Prime Minister Algirdas Butkevičius. 


Recently during the interview for Dutch newspaper Politiken Lithuanian President said, that Lithuania shall get free of energy hegemony in a couple of years. “We should stand the current situation for about two years”, - said Grybauskaite. And according to Lithuanian Prime Minister Butkevičiusgas price for Lithuania can reduce if Russian gas company Gazprom agrees to maintain good economic relations with Lithuania. In the opposite case according to him the gas price can be reduced only after the commissioning of the condensed natural gas terminal. Now Gazprom is the monopolist in the sphere of gas supplies in Lithuania, and yet the talks with the representatives of the Russian company are not held, meanwhile Lithuania is accomplishing all planned energy projects.



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In the end of January the representatives of Lithuanian government confirmed that the representatives of the European Commission, Gazprom and Lithuanian Government had a meeting in Vilnius. It’s worth noting that this meeting  had not been announced. Some of its details became known only post-factum. As the Head of the Parliamentary Committee on Foreign Affairs Gediminas Kirkilas let out, Lithuanian avoid announcements under the request of Gazprom. This points out that Russia is seriously concerned about the plans of Lithuania to build the CNG terminal. Some experts also prove that. They suggest that the plans of Lithuania of CNG terminal construction in Klaipeda are painful matter for the current Russian leaders and Gazprom monopoly in particular. Evidently, Russia would like to maintain monopoly and competition is unacceptable for it. This is philosophy of the political system, existing today in Russia. That is why it is painful for them, but for economic interests of peoples of Lithuania and Russia competitions is good. It is good for a consumer and always disciplines quite perfectly the supplier. The fact the Gazprom hasn’t been in competitive environment for a long time played a low-down trick with it, and now it is losing its European market, the supplies scopes are dropping, Gazprom is being pulled out by its competitors.


If Russian company wouldn’t have relied on retention of monopolistic control over the definite markets, territories, as well as long non-competitive contact forms, but would learn to trade in terms of an open market, it wouldn’t have lost that much, as it happened in recent years. 


According to some data, gas export to the countries outside the former USSR comprises about 65% of the peak level of 2008. The demand on Russian gas keeps on falling down. The price of the monopoly for Russia is the loss of ability to operate in terms of competitive market. For Russia the issue of Gazprom efficiency is the key one. If competition and market forces are able to discipline this company and enhance its efficiency, this will also be beneficial for the interests of Russia. And of the gas consumers in other states will have a choice, it doesn’t mean that Russian won’t sell gas to Lithuania, when it will operate in CNG terminal.


That is why one should positively perceive the fact that after the CNG terminal construction in Lithuania, Lithuanian consumers will gain an alternative. It also can be provided for Russian consumers. Today they have one monopolist controlling the whole market, and in course of the last year, there were periods, when domestic gas price in Russia, which possesses one third of the world gas stocks, was higher than in the USA, which is an importing state. That is why Russia in general faces the same challenges as Lithuania, which is seeking for an alternative.