Russian Counter-Offers to Baltic Nuclear Power Project In Lithuania

The nuclear power plant project in Lithuania is a regional, not merely a national project (“Lithuania Chooses Hitachi-General Electric to Build Nuclear Power Plant,” EDM, July 19). The Visaginas project is intended to meet electricity demand on a region-wide basis. Its commerciality will be optimal if the three Baltic States and Poland participate as stakeholders.
Negotiations on apportioning the financial stakes, and sharing the future output of electricity, will be complicated. Hitachi-GE might be offered as much as 51 percent of the shares while the remainder would be divided among Lithuania and potential investors from Estonia, Latvia and Poland (Delfi, ELTA, July 15).

Meanwhile, Moscow seeks to discourage investment in the Visaginas project by proposing two nuclear power plants in Lithuania’s immediate proximity: one in the Kaliningrad territory, the other in Belarus. Both are intended to create the appearance of commercial threats to the Visaginas project. Either one of the Russian proposals (if taken at face value) or the Lithuanian-based project are mutually exclusive competitors in the regional electricity market. Moscow seeks to discourage investment in the Visaginas project by suggesting that Russia would build a project of its own, pre-empting the Baltic regional electricity market in Russia’s favor. Both of its proposals, however, have only scant chances of becoming real projects if the Visaginas contract is signed.

Moscow can only bluff with its offer to loan 9 billion Euros ($12.74 million) to Belarus for a nuclear plant there. A site has been selected at Astravets, close to the Lithuanian border. This move seems mainly designed to trigger Lithuanian protests over environmental and safety issues. Moscow and Minsk fail to answer Lithuanian and international queries about compliance with safety criteria and environmental norms. No such study or any real plan is known to exist behind this Russian proposal, a decoy to create the appearance of a rival to the Visaginas project.

Some in Lithuania would like the government to campaign against the Russian-proposed plant in Belarus. Doing so, however, would lend this decoy project an aura of reality that it would not otherwise possess. Inadvertently it would support Moscow’s attempts to confuse the potential investors in the Baltic regional project. Understanding this, the Lithuanian government is raising the proper questions about Moscow’s and Minsk’s intentions at Astravets, avoiding loud statements and without politicizing the issue. An even more effective approach would include proposals to Belarus to join the Visaginas project; or commit to purchasing electricity from it, once completed.

In Kaliningrad, Russia proposes to build a nuclear power plant that would export electricity within the Baltic region (i.e., pre-empting that market) and to Germany. The proposed site is also located in immediate proximity to Lithuania. Exceptionally in this case, Russia offers up to 49 percent of the shares to companies from EU member countries. Moscow has also invited the Baltic States themselves to join the proposed Kaliningrad nuclear project, instead of the regional Baltic nuclear project in Lithuania. All of these overtures have failed thus far. Moscow, however, has announced an ambitious time-table to commission the first nuclear reactor in 2016 and the second by 2018. These goals, however, lack plausibility in the absence of investment partners and commercial markets for the electricity output.

Moscow might only make headway with a Kaliningrad nuclear project by co-opting some German or Polish business groups interested in importing or transiting low-priced electricity from that project. That possibility seems even less likely following the selection of Hitachi-GE as strategic investor for the regional Baltic project, and provided that the Visaginas project moves forward with the three Baltic States and Poland.

Estonia has repeatedly turned down the Kaliningrad option, most recently on July 5, clearly favoring the Lithuanian project (BNS, July 5). Russian Prime Minister Vladimir Putin offered Latvia a stake in the Kaliningrad plant in January of this year, but Latvia’s then-president Valdis Zatlers turned it down (BNS, January 17), and the current Latvian government under Valdis Dombrovskis has demonstrated a clear interest in joining the Visaginas project. However, Zatlers has just lost office, and the upcoming parliamentary elections pose the risk of bringing an alliance of Latvian oligarchs and local Russians to government. The new Latvian president, Andris Berzins, seemingly attuned to that trend, has made a series of ambiguous statements about the Visaginas project, most recently on July 19 while visiting Lithuania (BNS, Delfi, June 30, July 4, 19).

Russian-proposed nuclear plants in Kaliningrad or Belarus resemble Russian tactics with the South Stream gas project. To discourage investment in the EU’s Nabucco project, Russia attempts to create the appearance that it can pre-empt the regional gas markets. Analogously, Moscow proposes the Kaliningrad and Belarusian projects in hopes of making the Baltic regional project look redundant. The Visaginas project enjoys a head start, but can only succeed by avoiding delays that might turn the Kaliningrad project from virtual to real.