Archive for September, 2008

Russia will decide whether we Lithuaina will have electric power

I would like to present you with absolutely brilliant analysis of the current and the short-term Lithuania’s energy market situation.  This article was written by Audrius Paciulis and published in the weekly ‘Veidas’ on September 15.

It is very likely that Lithuania will have a shortage of electric power in January-February 2010.   From 1 January 2010 – the time by which the Ignalina Nuclear Power Plant (IAE) has to be decommissioned – the main raw material for production of electric power in Lithuania will be natural gas imported from Russia. Even if its price does not go up, (which is highly unlikely), still, the main electric power producers in the country will be thermoelectric power stations, including the biggest power station located in Elektrenai. The price of electric power produced by this power station is four times higher than the price of the electric power produced by the main electric power supplier so far – the IAE.

A parliamentary election campaign has started in Lithuania. This is why all the political parties, including the government, are working in the election mode. This means that all their time and effort is dedicated to the election campaign and to the meetings with the electorate, and the routine work is ignored for the time being. The problem is that some issues that are vital, for example, the supply of electric power after the shutdown of the IAE, cannot be ignored.

November 2008 is the deadline for the Lithuanian thermoelectric power stations to inform Gazprom about how much gas they are going to purchase in 2010 and later on, when these power stations will be burdened with the responsibility to provide Lithuania with electric power. In order to do that, the thermoelectric power stations need to receive a clear reply from Leo LT how much energy and from which suppliers – thermoelectric power stations, hydroelectric power stations, or other suppliers – it is going to purchase electric power, and how much of this electric power it is going to import. However, just like its predecessor, the Lithuanian 0.3 TWh.

Moreover, we need to take into consideration that the Scandinavian electric power is produced mostly by hydroelectric power plants. It is cheap only during the rainy periods, but it is not cheap in winter, when Lithuania needs the electric power the most. We could import some more electric power from Latvia, which launched a new thermoelectric power plant with the capacity of 400 MW, and which is in the process of building another generator of the same capacity.

Of course, we can assume that when the economic recession starts and the prices of electricity go up, the residents and the industries will start saving energy, and the need for electric power in 2010 will be less by at least 1 TWh than forecasted (especially if nature has mercy on us and the winter is mild). It is very likely that Lithuania will have a shortage of electricity in January-February 2010. Of course, the consumers may not necessarily feel this shortage, but businesses (especially the companies that do not have their own power plants) will have to go on an electric-power diet.

And the most important thing is that after we shut down the IAE, which produces cheap electric power (the electric power purchased from the IAE costs 6.8 cents per kWh), the price of electric power will undoubtedly double, because the cost price of the electric power produced by the Elektrenai thermoelectric power plant, if the prices of gas remain at the same level, is about 27-36 cents per kWh. If we add to the cost price the 21 cents per kWh for supply and distribution, the 8 cents per kWh of pollution tax, and another 3 cents per kWh of the price increase because the Kruonis hydroelectric power plant changed its status and because there are plans to increase the prices of the electric energy distribution and transfer in 2010, we will have to pay at least 59 cents per 1 kWh of electric power (current price the private consumers pay is 33 cents, including VAT; business companies pay more Lietuvos Energija, LEO LT is not providing the electric power producers with this information.

“This is a traditional scenario and a traditional problem,” one well-known energy specialist told Veidas. “Lithuanian Energy used to do the same. First it would say it was planning to purchase electric power from the Elektrenai and other thermoelectric power stations. It would demand lower prices, and then, the very last moment, it would announce that it agreed with Russia on the import of a cheaper electric power.

As long as the IAE, which produces two-thirds of all the electric power generated in Lithuania, is in operation, such a scenario is possible. But the situation will change radically after 2010, because the main electric power producers will be the power stations working on gas on oil. And these power stations need to take care of their supplies in advance, because the gas supply contracts are made in advance, and it will not be possible to suddenly purchase a big amount of energy resources (or at least cheap energy resources) from Russia, because it itself is f! acing a shortage of electric power, especially in winter,” he added.

If the Elektrenai thermoelectric power station is working at full capacity, it can produce up to 8 TWh [terawatt hours] of electric power per year, and thus compensate for the capacity that will be lost after the IAE, which is producing up to 9 TWh per year, is closed. If we add the capacity of other power stations, Lithuania will be able to produce up to 11.23 TWh of electric power in 2010, which is the capacity we will need in 2010.

However, this means that a considerable increase in gas import will be needed to ensure that the thermoelectric power stations can work at full capacity. The increase should be from the current 0.7 billion cubic meters to 2.3 billion cubic meters of gas import in 2010. This means that the total Lithuanian import of gas will have to be increased from the current 3.03 billion to 4.9 billion cubic meters.

Theoretically speaking, there is such a possibility. The former chief of the State Prices and Energy Control Commission, Professor Vidmantas Jankauskas, told Veidas that when Lithuanian Gas was privatizes, it was agreed with Gazprom that it would guarantee gas supply until 2015. Moreover, there is a possibility to increase the volume of the gas import to 6-7 billion cubic meters.

But there are two problems. The first one is that the capacity of the gas supply network that is used to deliver gas to Lithuania and Kaliningrad is not sufficient to double the throughput. It would take about 1 billion litas of investments to increase the throughput. But we have not heard so far about any steps taken by the government in this direction, even though this need was expressed in November 2007, during the meeting of the parliamentary committees on European affairs, foreign affairs, and economy.

The second problem is that we should negotiate with Gazprom the already rapidly growing need for gas supply now, so that we could reach an agreement in November. But the government is busy with the parliamentary elections, or does not have time, or does not see why it should take care of that, hoping to pass on this headache to the new government, which will be formed after the elections.

The Prices of Electric Power Will Double
And that is not all. We need to negotiate the much higher volume of gas import, and we need to negotiate the import of electric power, because up until now Lithuania has been importing the electric power it needed on an annual basis. So far, the biggest electric power exporter to Lithuania was Russia. For example, we are planning to purchase up to 1.25 TWh of electric power this year. A small amount of electric power is purchased from Latvia (during the high-water season, when the Riga hydroelectric power plant is working at full capacity).

After we build the electricity link with Sweden, we will be able to purchase more electric power from Scandinavia. The import of electric power was compensated for by the export of the cheap electric power produced by the IAE. But starting in 2010, when the IAE is closed, the forecast volume of import [as published] will decrease drastically from 1.42 to 0.8 TWh.

Moreover, we will have to look for other electric power suppliers. Russia, which according to forecasts will be consuming more electric power and will face a shortage of generating capacity, will be able to sell us only about 0.2 TWh (which is six times less than it sells us now). The import of electric power from Scandinavia should grow, from the current 0.06 per cent to 0.42 TWh.

The specialists who advised Veidas on the issue warn that the intention to purchase so much electric power from Scandinavia may turn out to be too optimistic. In their opinion, a real expectation would be a mere 0.1 TWh, in exceptional cases – up to Moreover, we need to take into consideration that the Scandinavian electric power is produced mostly by hydroelectric power plants. It is cheap only during the rainy periods, but it is not cheap in winter, when Lithuania needs the electric power the most. We could import some more electric power from Latvia, which launched a new thermoelectric power plant with the capacity of 400 MW, and which is in the process of building another generator of the same capacity.

Of course, we can assume that when the economic recession starts and the prices of electricity go up, the residents and the industries will start saving energy, and the need for electric power in 2010 will be less by at least 1 TWh than forecasted (especially if nature has mercy on us and the winter is mild). It is very likely that Lithuania will have a shortage of electricity in January-February 2010. Of course, the consumers may not necessarily feel this shortage, but businesses (especially the companies that do not have their own power plants) will have to go on an electric-power diet.

And the most important thing is that after we shut down the IAE, which produces cheap electric power (the electric power purchased from the IAE costs 6.8 cents per kWh), the price of electric power will undoubtedly double, because the cost price of the electric power produced by the Elektrenai thermoelectric power plant, if the prices of gas remain at the same level, is about 27-36 cents per kWh. If we add to the cost price the 21 cents per kWh for supply and distribution, the 8 cents per kWh of pollution tax, and another 3 cents per kWh of the price increase because the Kruonis hydroelectric power plant changed its status and because there are plans to increase the prices of the electric energy distribution and transfer in 2010, we will have to pay at least 59 cents per 1 kWh of electric power (current price the private consumers pay is 33 cents, including VAT; business companies pay more).

Source Veidas and the BBC Monitoring Service

September 23, 2008 at 6:55 pm 2 comments

Leo LT has announced its long-term strategy and it’s in trouble already

The Lithuanian Energy giant Leo LT had announced the long-term strategy for its activities.  The Leo LT was created in order to build a new nuclear plant, and to connect Lithuanian energy network with power grids with Poland and Sweden.

As the national investor company Leo LT believes reactors for new Lithuania’s nuclear power plant may be supplied by one of four global producers, including US Westinghouse and General Electric, Canada’s Candu and France’s Areva.

As Saulius Specius, Leo LT board member said during the press conference and BNS reported, “They all are working with us. Which one is chosen will depend on the quality of proposal – the best price and conditions”.

“We think that discussions should only be continued with these companies, which have relevant technical parameters and meet national security criteria,” he added.

The financial model of Leo LT, as set forth in the long-term operating strategy, included two reactors with a combined capacity of 2,200 MW, yet it should not be seen as a firm decision to reduce the capacity of new facility to 2,200 MW, from the maximum permissible level of 3,400 MW, Rymantas Juozaitis, Leo LT chairman, pointed out.

Mr Juozaitis further noted that “Output shares in MW to be assigned or chosen by the partners will be decided in future. We know two things – Lithuania will have the share of 1,300 MW and at least 34 percent of new facility Management Company. The maximum capacity of the plant remains at 3,400, the statements that its capacity has been reduced to 2,200 MW are not true”.

“Leo LT has reserved the share of 1,300 MW irrespective of how much it makes percent-wise. It will depend on the size of nuclear power plant, which will be known only after the tender, when we know the producer of reactors,” Specius said to the BNS.  ‘In line with the main scenario for new facility’s funding, initial investments would be made as early as 2009-2010, he added. “We have envisaged certain investments into early orders next year. We will try to speed up the construction of the plant so that the first unit is ready in 2016.”

I would like to remind you that Poland earlier demanded a 1,000-1,200 MW share of new plant’s output. Latvia and Estonia reportedly mentioned the share of 400-500 MW each.

However, soon after the plan’s announcement Leo LT came into troubles when some 50 MPs decided to ask the Constitutional court to explain is the process of the Leo LT creation did not violate country’s constitution.  Read more about it here or here.

September 23, 2008 at 6:27 pm Leave a comment

ii – NATO to the Balts – don’t worry, you are safe! Really, are you sure?

Just to illustrate my point  I would like to suggest you to have a look at a survey published in the FT, which was conducted in the Western Countries, our NATO allies in arms, so to speak.  There were few questions, but the most interesting was this; ‘Will you support or oppose troops from your country defending the Baltic states if Russia were to take a military action against them’.

According to the FT in Germany, Italy and Spain, more people say they would oppose the notion of their national troops rushing to defend the Baltic states than would support the idea.

In Germany, as many as 50 per cent of people say they would oppose national troops going to the defence of the three states, compared with only 26 per cent who say they would support it. Only in Britain and France do more people support the idea of their armies defending the Baltic states than oppose it.

Have a look at the survey.  Needless to say more…

September 23, 2008 at 3:03 pm Leave a comment

Baltic States – it’s time to take the informational space in our hands!

Since September 22, 2000 the Balts celebrate the Baltic Unity Day.  On September 20-21 the historians, cultural figures, journalists and diplomats gathered to discuss bipartite cooperation in a Lithuanian-Latvian forum in the town of Rezekne, southeastern Latvia.

There are few projects on bringing the two last remaining Baltic nations together.  The two Balts nations never really enjoyed a unity.  However, the last occupation brought us closer together.  After joining the EU the development of our cooperation moved to another level, it is largely initiated in Brussels; take it military, economic, social even cultural fields.  Last of such ‘unification’ took place this year when the New Member States acceded the Schengen.

This facilitates cross border communication between the two nations.  The folk interact more often, the Latvians are coming to Lithuania to buy food since it is cheaper here, and Lithuanians are buying something else in Latvia.  Now the two countries are working out a law that will allow the fire engines, ambulances or the police patrol cross the boarders without bureaucratic time wasting special permissions.  Recently a huge barn burned down on the Latvian side completely because the closest fire engine brigade was acutely on the Lithuanian side but the fire fighters had to wait for a permission to cross the border.

The youth is always way ahead in vanguard of process.  Hence, the frontier Latvian and Lithuanian youth are so integrated that they go and socialise together.  Even from time to time the fights brake out amongst them.  The causes are mostly the same, the girls…

The Lithuanians are very keen to buy property in the quiet and mostly untouched Latvian Baltic Sea cost.  After all 3,5 mln of Lithuanians have only 99 km of its own seacoast.  For many Lithuanians the Northern part of the country the Latvian Baltic seacoast is much closer geographically thaN the Lithuanian one.  Majority of the Lithuanians in the Northern part using Riga Airport since it is much closer than International Vilnius or Kaunas airport.

Having growing up in the Northern Lithuania I experienced this close interaction.  The first city I went to was not Vilnius; it was Tallinn and then Riga.  My classmates who spent their summers next to the frontier spoke fluent Latvian.  After all many Lithuanian deportees could still not return to Lithuania, hence many chosen Latvia.

We have much in common however; in practice we could do much more.  To put it simply; we don’t know about each other.  A common Lithuanian or a Latvian knows more what is happening in Russia that in the neighbouring Baltic state.  We must start creating a common informational sphere, which will bring us closer together.  And her I am talking about Pan Baltic information channels including of course our cousins Estonians.

As during the forum the Undersecretary to the Foreign Ministry Laimonas Talat-Kelpsa noted the Lithuanians ought to be more knowledgeable about Latvian literature, and Latvians about Lithuanian writing, with the same being applicable to cinema, music, and other phenomena of public life. It is important, noted Talat-Kelpsa, to warrant as many possibilities as is feasible for each of the countries to see the others TV channels, all the while encouraging cooperation among the countries’ national and regional press.

Yes, there is the Baltic Times, but it is a weekly not a daily, there are few monthly mags, there is the BNS.  There are few blogs in English about the Baltics.  Of course there is Delfi, which has the Russian language pages in all three branches.  However, it is not a secret that the most followed information channel is TV.  Why not so start with the national TV channels exchanging 5 minutes information blocks about each countries’ day events which would be broadcasted on the prime time news programmes?  Lets start from that, and lets get to know each other that way. 

Lets start creating our own information space in here!  The Romans noted that citizens refuse to feed its own army sooner of later they will clean the shoes of the enemy military.  We are already doing that.  The Moscow is in control of the Pan Baltic Information channels.  Maybe it is a time to take initiative!

September 22, 2008 at 9:07 pm 2 comments

NATO to the Balts – don’t worry, you are safe! Really, are you sure?

Perhaps it might be a gross exaggeration but the future historians will put a date of 08-08-08 next to the fall of the Berlin Wall, the 9/11 or a recent financial melt down.  Those dates marked a tectonic shift in the world politics and economics.  We can say, ‘yes, the world is not the same anymore’.

This date is not only about the Beijing Olympics, which mostly were pushed down because of the South Ossetian war  (I don’t think that the Chinese will ever forgive the Kremlin for that!).  I don’t want to argue who started the war, the most important what happened after.  The nightmare scenario is unfolding in the front of our own eyes and worst predictions of the ‘Russophobe’ Balts and Poles are coming true.  Far worst than that!  Who could predict in August 1 that Russia’s troop will be stationed some 50km from Tbilisi?

After joining the NATO the ‘Russophobe’ Balts began to take it for granted that they are save as long as the NATO exists.  Lithuanians even have the President’s G.W. Bush’s words on the wall of the Town Hall of Vilnius saying that that who will choose Lithuanian as an enemy will choose the USA as the enemy also.  He said that in 2003 from steps of the same building to the thousands of Lithuanians.  All of us took it for granted, like a confirmation, which we needed so badly.

The Lithuanians were so keen to join the NATO that effectively we adjusted our military to the NATO requirements to such extend that we came to realise that we don’t really have a territorial defence anylonger.  We have battalions who are ready to be deployed in the NATO special operation and the peace keeping missions in far far faraway countries.  There is a sad joke that those Lithuanian battalions could later be successfully deployed here for the peace-keeping mission, as the NATO peace keepers.  They will be perfectly fit to monitor how Russian military comply with its obligations in Lithuanian territory after a similar Georgia style blitz Krieg.

Should we be concerned about our security?  After all we are the members of the strongest military alliance, and there is an article 5, which will protect us.  Perhaps this question could be addressed to our allies.  According to various estimates the Russian army will need some 24 hours to take the Balts.  Will the Portuguese, Spanish, Belgium Dutch, or lets say Italian or German (in that matter also the French) will start a war with Russia?  What would Berlin, Paris or Rome say in that case?  Well, same as now – lets be pragmatic, lets don’t annoy our neighbour.

Lets us just assume that the Russia’s army will enter the Baltic States in December, why not during Christmas!  Would the above-mentioned capitals, risk retaliating in the face of the possible threat of a total Russian Gas cut?  Can Russia survive without the petrodollars for lets say 5 months?  Yes, it can.  Could the EU survive 5 colders months without the Russian gas?  It is possible but it would be extremely difficult.  The mutual Russia/EU dependence is a myth lets admit that for once.  This myth is based on assumption that the Kremlin became predictable and began to realise the benefits of conducting business in the Western standards.  The 08/08/08 only showed that Russia us unpredictable as ever.

One of the aims to go to the war with Georgia was to undermine NATO’s reliability.  First of all amongst the NATO hopefuls.  Then of course amongst the new NATO members.  Many questions are asked in Lithuania now.  During his trip to Tallinn a NATO General confirmed that there is the NATO plan to defend the Baltic States.  However, few days later in Vilnius he informs the journalists that his words in Tallinn were misinterpreted.  The Lithuanian electronic media is full of the articles published in the USA and European media calling for NATO to ‘do more in the Baltics’.  The German Sueddeutsche Zeitung quoted the Lithuania’s President saying, “If some out of they mind Russians planned an intrusion into our country, the occupation would be a matter of a few minutes.”  Latter the President’s press office issued a statement informing that he said ‘24h’ not ‘a few minutes’.  Well, 24 hours is much longer than few minutes but is it long enough to gather the top rank NATO generals for a meeting to discuss the response to the attack?

Theoretically the Article 5 has never been put in practice (post 9/11 was a different case).  This article is an essence of the alliance even though it could be argued that NATO has turned into a political club.  If the Article 5 would be breached that would bring NATO to its end.  Is it in Russia’s interest to break NATO up?  Yes, it is at least in the short term, since at the moment Russia is in peak of its strength due to the geopolitical shifts.  It is now or never to correct the mistakes which brought the ‘biggest Geopolitical tragedy of the 20 Century’.  The author of those words is doing just that.

Fantastic journalist and publisher Edward Lucas is calling the Balts to calm down, Russia should not attack us.  Mr. President Adamkus in the same interview for the Sueddeutsche Zeitung also noted that it is very unlikely that we will be attack militarily.  He noted that Russia will cut us off Lithuania the main energy supplies route, then will start interfering into our economy stronger and eventually will interfere in our politics.  On October 12 Lithuania is holding a Parliamentary elections.  The interesting times are ahead.  Meantime I would like to agree with Mr. Philip Stephens from the FT.

September 21, 2008 at 5:25 pm 3 comments

Lithuania’s main daily urges policymakers to boost country’s national security

Russian Tank in GeorgiaI would like to present you with the editorial from the largest Lithuania’s daily Lietuvos Rytas August 28.  If anyone would like to accuse the daily of Russo phobia I would like to remind you that this article appeared before the Finish foreign minister expressed his wish for Finland to join NATO.  The Swedes are also opened a discussion on further strengthening their relationship with this military alliance.  Could you accuse Finland and in this case Sweden of unfounded phobias?  Here we go…

The images of Russian tanks rolling through Lithuania are a thing of the past. Fifteen years ago, on 31 August, the last Russian soldier left Lithuania.

It seemed like the occupation army would stay in the depths of history forever. Yet, in the beginning of August of this year, Russian tanks stormed into Georgia and resurrected those images. It seems like it was harder to believe the Russians would leave 15 years ago than it is to believe they could comeback today.

A month ago such statements would have sounded like paranoia. Lithuania joined NATO four years ago, and we firmly believed we would always be safe from Russian storms under the NATO umbrella.

The only time the clear sky of Lithuanian optimism soured was in 2005, when a Russian jet SU-27 crashed in Lithuania, and Air Force Chief Jonas Marcinkus suspiciously flirted with Russian officers who came to investigate the incident.

The Russian aggression against Georgia has forced even the biggest optimists to stop and think. Even though Georgia is not a NATO member, its ties to the alliance and the US sort of said Tbilisi would be safe.

The Russians, who needed merely a few days to occupy Gori, Poti, and other Georgian cities and who burned and robbed those cities, showed they could not care less about NATO. Even the US was only able to condemn, urge, and express regret.

True, some tend to diminish the Kremlin’s war against Georgia by saying one should not make any conclusions about Russia’s intentions, because the seeds of the conflict in the region had been sown a long time ago and there was no other solution.

Yet, now we have heard this question: Who can be Russia’s next victim, which unscrupulously “defends” the interests of its citizens abroad, – Moldova, Ukraine, or the Baltic states?

It is possible the fear may be exaggerated, but a precedent has been created. After all, Hitler did not attack Poland right away. At first he had examined the West’s reaction with the Austrian Anschluss, the Czechoslovakian occupation, starting in the Sudetes.

Russia already recognized South Ossetia’s and Abkhazia’s “independence” and entrenched the aggression’s consequences, and we know that one’s appetite grows as one is swallowing foreign lands.

International law expert Dainius Zalimas said Russia’s growing political, economic, and military pressure was a threat to Lithuania’s security. He also said Lithuania ought to re-examine its national security strategy.

Only the Conservatives [TS-LKD] and the Social Democrats [LSDP] reacted to the Russian aggression. Meanwhile, in August (what a coincidence!) 31 MPs launched an attack against the country’s NATO membership [the Constitutional Court was asked to explain whether presence of NATO troops in Lithuania would be constitutional].

Our neighbours got rid of the false sense of security already. In Latvia, they immediately called an urgent meeting of the National Security Council to discuss the national security strategy.

The Latvian media announced that NATO started preparing a defence plan for the Baltic states. NATO has not confirmed this.

Yet, here is what became clear: The alliance still does not have such a defence plan. Not the best news, when one is hearing reports from Georgia, where the Russian Army is digging more and more trenches.

Fred Kagan, an influential American military analyst, admitted that “NATO contributed very little to the development of the Baltic states.”

Kagan urged NATO to increase security of the Baltic states, because Moscow could be tempted to attack them: “I think Russia has plans regarding the Baltic states and has created a precedent in Georgia, thinking it could use force to defend the Russian minority abroad.”

According to the analyst, only more serious work by NATO would reduce Russia’s desire to attack Estonia, Latvia, or Lithuania. For example, deploying antimissile and antitank systems.

We continue repeating the fifth article of the NATO treaty, as if it was a mantra: “An armed attack against one or more of the members in Europe or North America shall be considered an attack against them all, and other members will take action that they deem necessary, including the use of armed force.”

Does this mean, however, that NATO allies will send their divisions to defend Vilnius? Who could answer this question with a firm “yes” now?

As Polish Foreign Minister Sikorski accurately noted, “documents and agreements are good, of course, but Poland’s history is full of examples of situations in which Poland was forced to fight alone, because allies had abandoned us.” After Russia attacked Georgia, Warsaw immediately agreed to deploy US missiles-destroyers in its territory.

There is nothing similar in Lithuania. It is also hard to say how determined is NATO to change its position on Russia.

German Chancellor Angela Merkel, who visited Tallinn and Vilnius on 26 August, also realized that Western Europe’s reserved stance in the face of the Russian aggression worries the Baltic states. In Tallinn, the chancellor tried to be consoling by saying NATO would defend Estonia, and it would not be “formal defence.”

Sikorski’s statement, however, is not a mere metaphor; therefore, strategists of Lithuania’s defence policy should not rely merely on agreements and a few NATO jets in Zokniai [airport].

The relative peace we enjoyed for fifteen years after the occupants’ departure has ended. Today, as the Kremlin is showing its growing imperial fangs, we need much more to ensure the country’s security. The government, military officials, and diplomats are responsible for determining what concrete steps must be taken.

Source: BBC Monitoring

September 1, 2008 at 3:49 pm 1 comment


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