Baltic states aim to escape Russia's energy shadow

(TALLINN) - Long in the shadow of their Soviet-era master Moscow, the Baltic states of Estonia, Latvia and Lithuania want to step up a drive to end their energy market isolation within the 27-nation EU.

"The Baltic states want to be linked quickly to the EU energy market. That will considerably increase energy security in the Baltic region," Estonia's Foreign Minister Urmas Paet told AFP.

Electricity grids in the Baltic states dating from the pre-1991 Soviet era have left the region plugged into the Russian network, leading the three nations to be dubbed "energy islands" in the European Union, which they joined in 2004.

The three states are pressing the rest of the EU to forge a common energy policy at a time when concerns have mounted about Russia's use of its supply dominance on the oil and has market as a tool to influence ex-communist countries.

Along with Poland, they perceive they have been sidelined by EU member Germany, whose energy firms EON and BASF are working hand-in-hand with Russian giant Gazprom to lay a gas pipeline under the Baltic Sea.

The plan is to pipe natural gas under the Baltic Sea from Vyborg in Russia to Greifswald in Germany, by 2011, to supply energy-hungry western Europe -- bypassing states in eastern Europe which are on traditional transit routes.

Beyond the political fears over Moscow's market clout, there are worries that Russian reserves are not a long-term option for meeting EU needs.

"In the long run the electricity grids must be made independent of the Russian network for both technical and security reasons," Paet said.

"The best way to realise these projects would be with aid from the resources of EU programmes," he said.

"It is also essential to build the so-called Balticconnector gas pipeline between Finland and Estonia in order to reduce the dependence of the Baltic states on Russian supplies, which as we have seen are not always sufficient to meet the needs of Russia itself as well as Europe," he added.

Only recently have moves finally been made to establish energy ties from Baltic states to the north and south.

An undersea cable linking Estonia to Finland went online in January 2007.

By the end of this year the Baltic trio are meant to decide which of the three countries will be the hub for another cable to Sweden.

The Baltic trio's leaders gathered in Estonia last month and agreed to step up common efforts to integrate the Baltic and Nordic power markets by 2013.

And during an energy-focused gathering in Finland last week European Commissioner Olli Rehn -- who hails from that country -- acknowledged it was time for more.

"It is very regrettable that the Baltic states have not been able to fully benefit from the EU energy market. Linking them to the EU energy system will be one of the priorities for EU Commission in coming years," Rehn said in a speech to the energy conference in the southern Finnish city of Turku.

For Kari Liuhto, head of the Pan-European Institute at Turku School of Economics, the entire EU needs to wake up.

"The EU should finally understand that it is the crucial time to seriously consider how it can increase its own energy self-sufficiency instead of increasing its energy import dependency on Russia," Liuhto told AFP.

"Should the EU be unable to design a common energy policy for itself, the Kremlin will create an energy policy for Europe," he said.

Linking to the rest of the EU is not just a matter of importing power -- it also means more business opportunities.

Thanks to its status as the world's leading oil shale producer, tiny Estonia is self-sufficient and a net exporter of electrical power.

Estonia is also considering turning to nuclear power.

"We have launched a feasibility study about constructing our own nuclear power plant, although there has been no final political decision on nuclear power yet," said Andres Tropp, head of the nuclear division at the state-owned Eesti Energia, which produces 95 percent of Estonia's power.

Estonia has also chosen the nuclear option off its territory, by signing on to a four-nation project to build a power plant in neighbouring Lithuania.

The plan, which also involves Latvia and Poland, is to replace a Soviet-era nuclear plant in Lithuania which that country pledged to close by 2010 as a condition for joining the EU.

The plant is anticipated to come on stream by 2015, sending power to all four nations, although experts suggest 2017-2020 is more realistic because of sluggish negotiations.