News You Really Need To See: “Lithuania Offers Example of How to Break Russia’s Grip on Energy”

“Lithuania Offers Example of How to Break Russia’s Grip on Energy”

The New York Times, October 28, 2014, p.B3

http://www.nytimes.com/2014/10/28/business/energy-environment/lithuania-offers-example-of-how-to-break-russias-grip-on-energy.html

“The vast ship that eased into this misty seaport early on Monday was hailed by American and European officials as the strongest signal that the stranglehold Russia has on the Baltics and their energy needs can be broken.  The vessel, the Independence, is a floating factory for converting liquefied natural gas into the burnable variety.  It represents a direct challenge to the Russian way of doing business as many other countries in the European Union have dithered over how to deal with President Vladimir V. Putin and his attempts to reassert Russian influence over parts of the former Soviet empire like Ukraine. … Lithuanian officials say they had already pushed Russia into bargaining — something it has long resisted — when Gazprom cut its gas prices by about 20 percent in May. … The first shipment of liquefied natural gas, set to arrive on Tuesday from the Norwegian company Statoil, is equivalent to 60 million cubic meters of natural gas.  Further shipments from Statoil should reach the equivalent of 540 million cubic meters annually in the next five years.  That is a fifth of Lithuania’s needs.  Lithuania says the terminal, the only operation of its kind in the region, could become a beachhead to supply most of the needs of the other two Baltic states, Latvia and Estonia, which also rely on Russia for gas. … Even so, the company managing the project, Klaipedos Nafta, the state-controlled oil terminal operator, has not yet sold the majority of the liquefied natural gas terminal’s capacity — one of the factors that raise the important question of whether the terminal makes economic as well as political sense. … Another challenge for the project would be if Gazprom dropped prices to Lithuania to the point that running the terminal became uneconomical.”

Quickie Analysis:  By some accounts, only two sectors of Russia’s economy are competitive in the international marketplace: energy and arms sales. Finding alternate suppliers of energy has been the harder nut to crack, but Lithuania clearly has an incentive to try.  Will consumers resist the allure of cheap Gazprom gas long enough to see it through, though?

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