Power supply safety in the Baltic Sea region

By Olga Pavuk, Elena Narushevich (Ventas Balss), Andrey Cunayev

On September 26-27 Latvia's port city Ventspils is hosting an international conference on Safety of Energy Resource Supplies in the Baltic Sea Region in the Context of EU Enlargement. The organizers of the conference are the European Commission and the government of Latvia. The conference envisages the participation of representatives from all states of the region, Russia included. Questions asked by the BC are answered by patrons of the conference - the Prime Minister of Latvia Andris Berzins and the head of the Delegation of the European Commission in Latvia, Andrew Rasbash, as well as the mayor of the host city Ventspils and president of the Latvian Association of Transit Business, Aivars Lembergs.

Andris Berzins: "Cooperation with Russia is a priority of the same importance as accession to the EU or joining NATO."

What is your idea on the supply of power resources through the Baltic states in the context of EU accession?

Andris Berzins

The Baltic States have traditionally participated and acted as serious partners to all who want to export their goods to Western Europe and America, today one should say - to the European Union. We have developed a good infrastructure and by no means do we want to lose our role after enlargement of the EU. We want to be efficient, stable, predictable, safe and economically favorable partners for both the East and the West.

However, after enlargement of the European Union the traditional ways of providing power resources may slightly change since the European Union is steadily expanding. A number of countries have emerged, which traditionally receive power resources from the other side not from, for example, Norway or Algeria, or the Arab Emirates. This second branch has to be logically integrated into all the diverse ways of the EU power supply. This thesis is not an invention on the part of Latvia. As it is known, Russia and the European Union are in the process of the so-called Prodi-Putin talks. We simply have to help the European Union consider this issue as well as provide information about ourselves - what we think of it, what still has to be done. Besides, regarding some aspects there may be no need to do anything - simply use existing infrastructure and make a profit instead of investing large sums of money. All these issues have to be discussed. In view of the interest of the European Union in the environmental protection and preservation of natural resources etc., this third dimension becomes very important in the context of the Baltic Sea. This water body is too small compared with the activity connected with oil transport in the world. There may not be another region in the world with a similarly intensive oil transit. Regarding the Baltic Sea, which is rather confined, where each ecological accident may turn out to be a disaster for all the countries of the region, this issue is to be considered very seriously.

What is Latvia's situation in regard to development of the European power market?

We are in a favorable situation that provides enough possibilities. At the moment we can buy electrical power in Byelorussia, Russia, Lithuania and Estonia. That is, there is a choice. As to gas resources, in my opinion, the privatization of Latvijas Gaze gas utility showed that it was the right decision to attract investors from both the West and Russia. Moreover, Latvia has a gas storage facility, which provides all the Baltic States and even St. Petersburg with gas. We make all the payments rather regularly, we do not have any big debts for gas, which places us in a favorable light and advances our growth. The other day I met with the Prime Ministers of the Scandinavian countries within the formula 3+5. One of the issues we discussed was power markets. And I talked about the fact that Latvia has more natural underground pockets in places like Dobele, in the south of the country, which is twice or three times as big as that in the currently used Incukalns underground gas storage facility. Within the framework of common projects they may be used to secure a continuous provision of gas to the European Union.

As for oil products, there have been no problems for a long time - we are working in both directions - export and import. Nowadays we can buy oil products wherever we want to and wherever it is cheaper and more favorable.

Regarding the power market in the European Union, two letters of intent have been signed. Between Finland and Estonia on the building of an underwater wire connecting the Finnish and the Estonian power grids. And between Lithuania and Poland on electricity supply wires connecting in the future the power grids of these two countries. That means that Latvia will also automatically acquire an additional possibility to buy electrical power in other countries. In the last meeting of the Cabinet of Ministers of the Baltic States the year 2006 was declared to be the deadline for the liberalization of our power market. A system should be worked out, allowing everybody to choose where to their buy electrical power. These are general plans.

Of course, there is also the idea to build a pipeline from Norway to Poland. But this project is very expensive as well as unsafe. It might be wise to connect the existing power grids, which were made during the Soviet period and modernize them. It might turn out to be much cheaper for all of us. Any way, the expenses will be borne by tax payers therefore it is necessary to pay it plenty of thought before choosing. The same applies to the export of oil products. Economic profit, safety and the quality of the offered services should be taken into consideration in everything. And Latvia serves as a good example in this respect. It wasn't just for nothing that the EU chose Latvia as the seat of this conference.

Which sectors of power industry will play decisive roles in the future EU?

Forecasts indicate that, on the one hand, the power consumption in production has a tendency to decrease. On the other hand, the growth and, most importantly, increased consumption of power resources in everyday life show that in general the demand for power resources will increase. The main emphasis will be laid on power resources which are environment-friendly, safer for people, provide more efficient consumption and do not increase the global warming. From this point of view, gas and electrical power will be the main sectors. However, oil products will continue to be consumed to a large extent. In everyday life the increase of their consumption is connected with the increase of the number of vehicles. In Latvia, for example, there is already one vehicle per household registered. And every year this number increases by 35,000 officially registered vehicles. These figures themselves influence both the demand for and consumption of petrol.

What is the role of Latvia in the EU-Russian dialogue in context of cooperation on the power market?

Latvia is interested in using the experience and quality of services acquired in the past. Russia is today dealing with the issue as to what is more favorable. To invest billions in establishing new infrastructure branches or to channel these financial means to other spheres, for instance, schools, hospitals etc., or to use the existing infrastructure which can provide the necessary services? If today these issues are still colored by certain political aspects, then after Latvia's accession to the EU, I think they will automatically disappear. Therefore good neighborly relations with Russia and mutually favorable cooperation are priorities of the same importance as accession to the EU or joining NATO.

Head of the Delegation of the European Commission in Latvia, Andrew Rasbash

What are the main priorities on the part of the EU in the business of transportation of oil and gas resources?

Andrew Rasbash

In the Green Paper "Towards a European strategy for the security of energy supplies" published in November 2000, the European Commission highlighted that, if no action was taken, the EU's dependency on imported energy could increase from 50% to 70% within 20 to 30 years, with the dependency on oil imports reaching 90%. The report also emphasised that enlargement would "only serve to reinforce this trend. Natural gas imports to the applicant countries may rise from 60% to 90% of demand, and oil from 90% to 94%".

While the EU is promoting a number of policies to face this challenge, including energy saving and energy efficiency measures, it is also working both to ensure the security of energy supplies and the safety of the energy transportation infrastructures. While this evidently covers hydrocarbon pipelines, it also includes the transportation of hydrocarbons by sea - think of the effects of an Erika-type disaster in the enclosed Baltic Sea - and the transportation of hazardous petroleum products by rail.

How can countries of the EU, as consumers of energy, interest Russian manufacturers of power resources.

The Russian Federation is extremely well-endowed with energy resources. The EU, on its very border - particularly after enlargement -  is in the process of creating the world's largest and most integrated energy market.

In addition to the huge size of this market and its geographic proximity to Russia, all the forecasts indicate that the demand for imported oil and gas will continue to increase in the EU.

The single EU market establishes common trade and competition rules across 15 - and shortly up to 30 - European countries. Such an integrated single market presents very significant business opportunities for Russian energy companies.

What actions are carried out on part of the EU for improving the safety of petroleum and gas transportation?

Discussions are underway with the hydrocarbon producer and transit countries for the joint evaluation of the safety and security of the energy transport infrastructure. The objective is to clearly identify the requirements and then to promote the necessary financing for the upgrade, rehabilitation and eventual enhancement of the energy transport infrastructure. At the same time, the feasibility of a regional satellite accident prevention monitoring system for oil and gas infrastructures will be examined.

Does the EU intend to invest in modernising the oil refining enterprises of Russia and Lithuania so that fuel quality corresponds  to European standards?

Such decision and such investments are the responsibility of private companies who will base any such decisions on their commercial interests. However, it is clear that, as Lithuania joins the European Union, it will need to conform to the environmental legislation.

How can co-operation between east and west be increased in order to introduce technologies increasing the safety of energy transportation?

In our Energy Dialogue with the Russian Federation, the importance of reinforcing energy research and technology co-operation has been repeatedly underlined. It is for this reason that we have placed a high priority on ensuring that an EU-Russia Technology Centre foreseen under the Dialogue is inaugurated in Moscow before the end of this year.

This Centre will act as a catalyst and a focus for increasing co-operation in energy technology, including technologies, which will enhance the safety and security of energy transportation.

How will Trans-European energy networks, covering not only electricity and gas, be developed in future?

The TEN energy networks are being adapted to EU enlargement, taking into consideration the need for energy security and energy diversification of all the countries that are, or will soon be, members of the EU.

Aivars Lembergs: "We are for free access to transport infrastructure."

In your opinion, why is the theme of the conference an urgent issue for Latvia?

Aivars Lembergs

The issue of safety has always been of the utmost importance for all countries, unions and also for each individual. In the general context of safety, the safety of energy supplies is no less important than physical safety. And since the countries of the European Union as well as Latvia are consumers, in regard to the safety of the power industry, they depend to a large extent on supplies from outside. That determines the importance of power supply from different sources.

In Ventspils we are carefully following the dialogue between the European Union and Russia about an increased role and place of Russia in the area of power supply and therefore also power safety in the European Union - "the power dialogue Prodi-Putin". We are glad that this dialogue not only continues but also has a pragmatic development. And, of course, we are not indifferent to the role and place that Latvia may be allotted in this dialogue and within this cooperation as a candidate state and in the near future, as it seems, also as a member state of the European Union.

With regard to the political map of Europe in the future, it is quite clear that the crossing of the Latvian border will mean the crossing of the border of the European Union. That means that our communications, our infrastructure, our possibilities are also the possibilities of the European Union. And since our country has been providing transit of power resources for over 40 years securing, within the range of our possibilities, safety of these supplies, we expect that with the accession to the EU we will not lose our role and place in the power supply system of the European Union.

It is my opinion that Latvia does not have very many economic advantages that might interest the European Union. I believe that the transport and communications system of Latvia is one of the few areas, which have and will retain their role and importance in the cooperation of large-scale economic structures like Russia and the European Union.

The issue of safety has become even more important in view of the events that have taken place in the course of this year and have increased the urgency of the issue of cooperation of Western civilization (Russia included) in regard to safety.

How can the accession of the Baltic sates and Latvia in particular to the European Union influence the situation in the area of power transit in the region?

I will begin by saying that the principles, regulations, on which the infrastructure is based and particular commercial structures function are of the utmost importance. We fully aggree to the principles brought forward and adhered to by the European Union. Those include a free access to the transport system, the absence of political or any other discrimination, the freedom to choose the supplier. These principles are important to everybody, us included. And we are convinced that we will achieve this objective. As to Latvia, at least in regard to those enterprises, which are involved in oil transport, these principles function already now.

The accession of the Baltic States to the European Union will secure further the situation in the area of the transit of power supply in the region. Of course, the attempts of Russia to develop the export of energy supply, particularly oil transit, in other directions are obvious. It is absolutely understandable. But taking into account the necessity to increase considerably the extent of oil export, I think, not only new possibilities will be developed, but also those that have been in operation for years will be used.

I am somewhat optimistic in regard to the plans about developing oil transit capacity up to 20-32 million tons p.a. which we put forward to our partners in 1997-1998. These plans will be carried out. I will not make a guess as to when it is going to happen - next year or in five years, but I think it will happen and it is rather logical since these plans are economically sound.

How will changes in the political map of Europe influence relations between this country and Russia?

In regard to Russian-Latvian relations, I support the view that the political leadership of Latvia has to act according to the present reality and events, not prejudices from the times of the Cold War, and should not put a sign of equality between the USSR and Russia today. An approach based on such atavisms will never create a favorable result.

The development of the dialogue between the European Union and Russia in regard to the issues of safety and anti-terrorism in general, power safety included, and the development of the dialogue between the United States and Russia considered, it becomes clear that the dialogue between Latvia and Russia is lagging behind these events.

I think that the current political situation in Latvia fully allows, without any postponement, to present non-citizents who have spent in Latvia, for example, more than five years with the possibility to be elected at least in local governments. And we have already made an effort to involve non-citizens in the political life of the city and in the making of decisions in the local authority structures. I am talking here about the activities of the advisory board on the issues of non-citizens at Ventspils city council. Unfortunately, these are just partial measures.

Latvia must abolish the totally ill-considered Law On Education which provides the introduction of the Latvian language as the language of learning in all Russian schools in 2004. Many school children and teachers are not ready for that, neither is the methodological material. The change must take place completely voluntarily without any administrative enforcement. I have repeatedly drawn attention of the government and the President of this country to this problem. For the time being no changes are expected regarding this issue. I believe that in case these requirements are not abolished, first, this law will be a dead law because nobody will observe it, and, secondly, if this law is nevertheless observed with the help of crude, administrative methods, it will cause destabilization of the political situation in Latvia, which is not in the interests of Latvia, or the European Union, or NATO, or the United States. We will not gain any supporters concerning this issue. And those will be just our problems.

Economic cooperation on serious issues is impossible without a political dialogue. And I am not talking now about the sale of sprats. The discussion of the specialization in regard to the issue of safety, power safety included, also demands a realistic assessment of the political situation.

What role do you allot to Ventspils after the accession to the European Union, taking into consideration the fact that, on the one hand, it will already be a European port but, on the other hand, according to your well-known doctrine - a "Russian" one?

I still believe that Ventspils is a Russian port. My approach is based on the fact that we serve our customers but our main customers are Russia and Byelorussia. Therefore Ventspils is and will remain a Russian port, which is situated in the territory of Latvia and very soon in the territory of the European Union. And it does not diminish its role and possibilities in any way.

I do not see any problem in this respect. A problem exists in that, first, the management of Ventspils port is to improve its work with customers. And, secondly, we do not want to experience administrative obstacles and discrimination as to railway tariffs and the solution of other issues, we expect the same attitude that is shown to others.

In your opinion, what are the tasks that the conference ought to solve?

The conference has been initiated by the European Union, and Latvia, as it is known, has entered the INOGATE program which in its initial stages was, in my opinion, an alternative project for supplying Europe with power circumventing Russia. Now these emphases are changing and such one-sided approach does not exist any longer. But if the task to circumvent Russia does not exist any longer, Latvia is in no danger of being circumvented either. Here we and Russia are in the same boat.

As soon as the emphases of the European Union in the INOGATE program changed, Latvia and Ventspils emerged on the philosophical maps of the EU regarding the routes of power supply. For us it is important that these maps are revised not only by the European Union but also by Russia, Kazakhstan. And we are not forgetting about our other partners in the area of power supply transit - Byelorussia and Lithuania. In the context of power supply and safety we must not forget about environmental protection. We see what is going on in Germany, Austria, Czech Republic right now while I am giving this interview. This is how we pay for our indifference to environment. Nature revenges our improper attitude to it. And since the intensity of the exploitation of the Baltic Sea is going to increase, the urgency of issues of environmental protection also increases. It is essential not to leave these issues outside the framework of the talks. Thus the conference should concentrate on two important issues - safety of power supply and environmental protection.

I think that in Ventspils we have managed to combine power transit and the transit of oil and oil products with clean air, a clean sea and the best beach which is situated only several hundred meters away from the moorings and wharves of the oil depots.

And what are your thoughts concerning the fact that the conference is taking place in Ventspils?

The fact that the European Union offered to have this conference in Latvia, in Ventspils, proves that this country is considered, first of all, a future member of the European Union and, secondly, a reliable partner and participant in the whole power supply system of the European Union.