Global Economics

Vilnius Wages Fight with EU to Keep Nuke


Despite an agreement when it joined the EU, Lithuania lobbies to keep a nuclear power plant running beyond its deadline for closing

At a time when European nations are being urged to close old nuclear power plants and split state energy monopolies into competing private companies, Lithuania is doing the exact opposite.

Although Lithuania agreed to shut down its Chernobyl-style nuclear plant and reconstruct it as one of the conditions for joining the European Union, the country is now lobbying to be allowed to keep its Ignalina nuclear power plant running beyond its 31 December 2009 deadline for closing.

Former Prime Minister Aleksandras Abisala has been appointed as Lithuania's persuader-in-chief -- he is the head of a special government commission created to make the case for Ignalina in Brussels. Lithuania sees Ignalina's looming closure as a threat to its economy and energy supply.

"Extension of the nuclear power plant's operations for several years could be one of the possibilities to neutralize energy threats," Abisala said when he accepted the role in February. "We have no authorization to negotiate. We are authorized to hold consultations."

Domestic opinion on whether Abisala has a chance of keeping the EU's hands away from Ignalina's "off" switch is fluctuating.

In late 2007, the mood was increasingly optimistic. President Valdas Adamkus said in October, "I think that any reasonable establishment or person will understand we may consider a period of extension so as to have us shift from one system to the other."

However, a stonewalling response from EU Energy Commissioner Andris Piebalgs has increased pessimism. Even Abisala rates his chances of winning an extension as no better than one in 20.

The fact that Bulgaria, also a new EU member state, has already shut down a more modern nuclear plant is unlikely to improve those odds.

When Abisala does arrive in Brussels, he will be armed with a hastily assembled document designed to spell out the consequences, both economic and environmental, of shutting down Ignalina, which is the country's major energy provider. Essentially, it will be a statement that nuclear shutdown would cause economic meltdown.

Lithuania's presence in Brussels is starting to coordinate its efforts. "After the [Ignalina plant] is closed, energy will be generated by the Elektrenai power plant, which also produces large amounts of greenhouse gases," European Parliament member Aloyzas Sakalas said after meeting with Prime Minister Gediminas Kirkilas in February.

That the EU wants to close old nuclear reactors and reduce the emissions of greenhouse gases, but it can't have both at the same time, seemed to be the implication.

"If they do not decide to do something for us this fall" -- when he hopes Brussels might agree to extend Ignalina's life -- "we should not expect anything afterwards," Abisala told journalists in the wake of his appointment, describing his task as a diplomatic mission rather than an energy assignment. "We have a Plan A -- to search for political solutions [and] table the situation to the European Commission and members of the European Union."

He didn't reveal whether there is also a Plan B.

BUNDLE UP

Lithuania's energy disputes with the EU go beyond the Ignalina project. The EU has made it clear that states cannot have genuinely competing energy companies unless state energy monopolies "unbundle" -- but Lithuania is busy bundling as much as it can.

After months of extraordinary wrangling, Lithuania established the Lithuanian Energy Organization (LEO LT), a semi-national, semi-private entity officially known as a "national champion," in January. Poland took similar steps last year, and Bulgaria has announced plans to follow the lead.

LEO LT is an attempt to shoehorn the national grid and the separate companies responsible for energy distribution in the east and west of the country into a single entity. The company will sign contracts with the national energy companies of Latvia, Estonia, and Poland.

Although the government retains a majority stake in the company, the private owners of the former distribution networks seem set to benefit the most. Suddenly they find themselves part of a grand project that is underwritten by the state, so there is virtually no risk in involvement.

Even though it looks like a done deal, LEO LT could still be nixed. Brussels' exact stance on the company remains unclear, particularly after Lithuanian member of the European Parliament Ona Jukneviciene asked the European Commission to ascertain whether the company is even legal under EU law.

The commission is due to deliver its verdict at the end of March. If it rules in favor of LEO LT, it will help move the Ignalina project forward, but it will also endorse a sort of quasi-nationalization of a strategic industry. Such an endorsement seems antithetical to the EU's fervent anti-bundling rhetoric. On the other hand, a ruling that LEO LT creates a monopoly and cannot be allowed will further stymie the new plant at Ignalina, a project already fraught with delays.

A European Bank for Reconstruction and Development study in January suggested 2020 as an estimated switch-on date for a reconstructed Ignalina II.

As well as being responsible for the eventual upgrade of Ignalina, a huge undertaking that will require international cooperation, LEO LT would also oversee the building of energy links to Poland and Sweden.

POWER POLITICS

As usual when it comes to Baltic geopolitics, the reasons behind Lithuania's fervent desire to keep Ignalina open and consolidate its energy sector despite the EU's directives can be found over the border in Russia.

Ignalina is Lithuania's only nuclear plant, and it provides roughly 70 percent of the country's electricity. If the plant closes in 2009, the region will face a serious energy deficit.

Various plans are being made, somewhat belatedly, to fill the gap with small-scale power plants or increased use of Estonian oil shale reserves. But the only viable alternative source of energy is Russian gas. For political, commercial, and historical reasons, reliance on Russia's gas-rich clutches is the last thing Lithuania wants.

The great irony is that by causing Brussels so much bother, Lithuania is contributing indirectly to the fragmentation of energy supply that Russia clearly wants. Having split Northern European countries into pro- and anti- camps over the Nord Stream gas pipeline -- helped immeasurably by EU members' unwillingness to put a united stance ahead of old-school national interests -- Russia is now doing exactly the same with its South Stream project among the countries of Southern Europe.

Russia has signed up countries including Germany, the Netherlands, Hungary and Bulgaria to support one or other of the schemes and has tacit support from end-of-the-line consumers such as the United Kingdom. It seems that an unbundled European energy policy could be headed to the shredder before the ink is even dry.

Meanwhile, although Lithuania's Ignalina gamble may have tough odds, it is no million-to-one shot.

Baltic and Polish energy officials are expected to reconvene in July and August to discuss a comprehensive environmental impact report and decide on the next steps to take. By then, France will have taken over the six-month rotating EU presidency from Slovenia. France's nuclear company, Areva, seems to be the most likely potential builder of a new Ignalina plant, and if Areva is close to getting the contract -- worth billions of euros -- who knows what pressures could be brought to bear behind the scenes.

So while Lithuania's determinedly national-interest solutions to its energy crisis go against EU policy on paper, they may be closer to the real EU norms of energy politics. The trick for Lithuania will be in getting fellow member states to admit as much.


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