Viewing cable 06VILNIUS228
Title: BALTIC STATES AGREE ON A NEW NUCLEAR POWER PLANT IN

IdentifierCreatedReleasedClassificationOrigin
06VILNIUS2282006-03-03 16:11:00 2011-08-30 01:44:00 UNCLASSIFIED Embassy Vilnius
This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 02 VILNIUS 000228 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ENRG ECON EINV BEXP LH EN LG
SUBJECT: BALTIC STATES AGREE ON A NEW NUCLEAR POWER PLANT IN 
LITHUANIA 
 
 
¶1. (U) SUMMARY:  The prime ministers of Latvia, Estonia and 
Lithuania declared their support February 27 for a common Baltic and 
EU energy policy and elaborated objectives for long-term Baltic 
energy cooperation.  The common energy policy the PMs endorsed 
anticipates construction of a new nuclear energy reactor in 
Lithuania.  The PMs did not discuss technical specifications for the 
reactor or establish a time frame for construction.  The 
nuclear-focused strategy is a central element of Lithuania's plan to 
reduce the country's dependence on Russian energy.  U.S.-based 
Westinghouse is a potential beneficiary of this development, but it 
faces tough competition from a Franco-German consortium that may 
have the inside track.  END SUMMARY. 
 
A COMMON ENERGY POLICY 
---------------------- 
 
¶2. (U) Estonian PM Andrus Ansip, Latvian PM Aigars Kalvitis, and 
Lithuanian PM Algirdas Brazauskas met February 27 in Trakai, a 
popular tourist destination outside of Vilnius to discuss a joint 
energy strategy for the three Baltic countries.  Immediately 
following the meeting, the ministers issued a joint declaration and 
joint communique.  (We shall report the text of the declaration and 
communique septel.)  In the communique, the PMs expressed support 
for a new nuclear reactor in Lithuania.  The announcement 
constitutes an about-face for GOL energy policy.  During its 
negotiations to join the EU, Lithuania pledged to decommission the 
two Soviet-built nuclear reactors at Ignalina nuclear power plant. 
The GOL took the first offline in December 2004.  The second will 
close by or before the end of 2009. 
 
WHY NOW? 
-------- 
 
¶3. (SBU) Dr. Anicetas Ignotas, a Ministry of Economy Undersecretary 
responsible for energy security policy, told us March 2 that the GOL 
initiated this meeting because "the time was right."  A 
constellation of events, Ignotas said, compel Baltic cooperation. 
These include: 
 
-- the EU's drafting of a new energy policy that describes the Balts 
as an "energy island" with no direct connection to the EU and its 
energy supplies; 
-- the recent disruptions of Russian-supplied gas to Ukraine and the 
Caucasus; 
-- high oil and gas prices; and 
-- the German-Russian agreement to build a Baltic Sea pipeline that 
bypasses Estonian, Latvian, and Lithuanian territory. 
 
Ignotas also claimed that all three Baltic countries anticipate 
receiving payments from carbon-credit trading from Kyoto Treaty 
members who will exceed their carbon-emissions quotas -- especially 
EU-15 countries.  He said that the Balts agreed that spending this 
windfall on carbon-free nuclear power generation capacity made 
sense. 
 
¶4. (SBU) Ignotas maintained that the GOL has spent more than a year 
laying the groundwork within the EU for this announcement, and 
opined that the PMs' statements should have taken no one in Brussels 
by surprise.  He claimed that this preparatory work will pre-empt 
negative reactions from other EU members. 
 
FEW DETAILS SETTLED 
------------------- 
 
¶5. (SBU) The Trakai meeting set a broad political framework without 
spelling out specifics.  The participants did not detail technical 
specifications, financing mechanisms, or the construction timetable 
for the nuclear reactor they will build.  Vaclovas Miskinis, an 
influential advisor to the GOL on energy issues and the Head of the 
Laboratory of Energy Systems Research at the Lithuanian Energy 
Institute, told us that the PMs "are very far away from real 
discussions regarding the type of reactor" that the three countries 
might agree to build.  Undersecretary Ignotas, who attended the 
Trakai meeting, emphasized that the process of choosing the type of 
reactor would be open and competitive.  Both Miskinis and Ignotas 
dismissed press reports that suggested that the PMs had agreed to a 
definite construction date or reactor type. 
 
GOL PLANS NATIONAL ENERGY STRATEGY 
---------------------------------- 
 
¶6. (U) Minister of Economy Kestutis Dauksys, in an interview 
published in a leading daily on March 1, said that his ministry is 
preparing a new national energy strategy.  Only after the GOL 
approves that strategy, he said, will the GOL decide whether and how 
to involve itself in the construction of a new nuclear power plant. 
The article did not suggest a timeframe for this decision. 
 
¶7. (SBU) Ignotas, however, suggested that the GOL might take a 
slightly different approach.  When we asked when the Ministry of 
Economy might submit this plan for GOL consideration, he said 
cryptically that the government needed to make some "big decisions" 
before drafting such a plan.  He refused to elaborate, but the clear 
implication was that construction of the reactor would be a central 
element of the national energy strategy. 
 
THE COMPETITION TO BUILD THE NEW PLANT 
-------------------------------------- 
 
¶8. (SBU) Miskinis told us that several Western energy companies have 
already declared interest in investing in and/or building a new 
nuclear power plant in Lithuania.  He said that French AREVA Group 
is a leading contender and that many experts believed that an EPR 
(European Pressurized Reactor) to be the best choice for Lithuania. 
The French-German consortium Framatome ANP, a subsidiary of AREVA, 
and Siemens, he noted, are currently building this type of reactor 
in Finland. 
 
¶9. (SBU) Ignotas said that he thought the best approach for 
Lithuania would be to build two 700-900 megawatt reactors 
simultaneously to create a plant that would generate approximately 
1600 megawatts. (NOTE:  This would be the same electricity 
production capacity of the AREVA-Siemens reactor under construction 
in Finland.)  Ignotas also said that the GOL was sending a team to 
Finland on March 13 to inspect the nuclear power plant under 
construction there. 
 
¶10.  (SBU) There is an American contender in the competition as 
well.  This Mission has been working with Pittsburgh-based 
Westinghouse, which seeks to sell the GOL on the merits of its 
IRIS-type reactor.  Westinghouse is working with a multinational 
consortium that includes Bechtel, Curtiss-Wright, Massachussetts 
Institute of Technology, and several other U.S. and foreign 
entities.  The company is aware of the latest developments, and we 
are encouraging them to move quickly before Framatone runs away with 
the competition. 
 
COMMENT 
------- 
 
¶11. (SBU) The GOL is intensely concerned about energy security, and 
sees a new reactor as a way to reduce dependence on Russian energy. 
This vision's realization faces many obstacles, including lingering 
internecine rivalries and differing priorities among the three 
Baltic republics; the high cost of new reactors (carbon-trading 
"windfall" notwithstanding); and the GOL's accession agreement with 
the EU, which in the view of many Europeans commits Lithuania to a 
nuclear-free future.  For our part, we will work to ensure that 
Westinghouse, as well as any other U.S. companies that join the 
bidding process, receive fair consideration as this prospective 
billion-dollar deal develops. 
 
KELLY