Viewing cable 07VILNIUS796

07VILNIUS7962007-11-05 13:34:00 2011-08-30 01:44:00 CONFIDENTIAL Embassy Vilnius
DE RUEHVL #0796/01 3091334
R 051334Z NOV 07
C O N F I D E N T I A L SECTION 01 OF 02 VILNIUS 000796 
E.O. 12958: DECL: 11/05/2017 
Classified By: Ambassador Cloud for reasons 1.4 (b) and (d). 
¶1.  (U) Begin summary.  In an October 25 meeting, Economy 
Minister Vytas Navickas told the Ambassador that the capacity 
of the new Ignalina nuclear power plant (INPP) would not be 
known until the environmental impact assessment was completed 
at the end of 2008.  He expressed confidence that, despite 
recent hiccups, Poland and Lithuania would ultimately sign an 
agreement on a power bridge.  The Ambassador and Navickas 
also discussed natural gas and barriers to investment.  End 
¶2.  (C) Ambassador Cloud met with Economy Minister Vytas 
Navickas, Under Secretary Anicetas Ignotas, Advisor to the 
Minister for Public Relations Ricardas Slapsys, and the Head 
of the Ministry's Protocol and Communication Division, Lina 
Neverbickiene on October 25.  Navickas predicted that the 
environmental impact assessment for the new INPP would be 
completed by the end of 2008.  He said that information from 
the environmental impact research has already been sent to a 
number of nearby nations for analysis, and specialists from 
his Ministry had already discussed the issue in Riga and 
Tallinn.  Upon receipt of proposals and comments from nations 
concerned by the construction of the new INPP, Lithuania will 
be able to complete the environmental impact assessment and 
make the appropriate calculations to determine the plant's 
capacity and the related cooling capacity of the adjoining 
Druksiai lake.  Navickas clarified that technology exists to 
cool the new INPP without using exclusively Druksiai lake 
Polish Power Bridge 
¶3.  (C) Despite the very public failure during the October 10 
- 11 Vilnius Energy Summit by Poland and Lithuania to sign an 
agreement on building a power bridge, Navickas said that the 
two countries did not suspend speaking about energy 
relations.  He added that he had met with President Adamkus a 
few days earlier, and said Adamkus felt the energy 
relationship with Poland was on solid ground. 
¶4.  (C) Navickas explained that the power bridge agreement 
does not contain a timeline for construction, but said that 
by 2012 the line must carry 1,000 MW.  In order for Lithuania 
to benefit from the connection, three to four power lines 
must be constructed under the power bridge project.  Navickas 
emphasized Lithuania's position is quite firm and public: 
the GOL cannot guarantee Poland a specific amount of power 
from the new INPP because it does not yet know the capacity 
of the new plant.  Lithuania could offer more power to the 
Poles, but that power might not come from the INPP.  For 
example, he mentioned that Lithuania might buy cheap night 
power from the Poles to operate the pumps at the Kruonis 
hydro power station.  During the day, the water pumped during 
the night could run the turbines at the plant and thus 
Lithuania could sell 900 MW to Poland.  According to 
Navickas, the Poles did not accept this proposal. 
¶5.  (C) According to Navickas, 200 million Euros worth of 
power bridge financing must come from sources other than 
Poland and Lithuania.  He said the INPP decommissioning fund 
could be used for this purpose. 
¶6.  (C) Navickas told the Ambassador that after the closing 
of the current INPP, and before the completion of the new 
one, Lithuania has the possibility to negotiate with Russia 
and Ukraine for additional power, but he acknowledged the 
price vagaries that could result from such agreements. 
Without a Polish power bridge, Lithuania will have to rely on 
the Elektrenai power plant for additional electricity.  The 
Elektrenai plant is an inefficient, natural gas fired plant 
built in 1962.  The director of the Elektrenai plant wants to 
charge 37 LTL cents per Kwh of electricity produced.  The GOL 
will allow him to charge only 29 LTL cents per Kwh so as not 
to demonstrate the pricing pressures Lithuania faces for 
electricity production, Navickas said.  Thus, he hopes that 
after the decommissioning of the INPP the Russians will see 
that Elektrenai charges 30 LTL cents per Kwh and offer as a 
competitive bid 25 LTL cents per Kwh. 
Natural Gas 
¶7.  (C) The Ambassador noted that for imports of natural gas 
Lithuania depends on one source (Russia) and that the pricing 
varies greatly.  Navickas told him the Deputy General Manager 
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of Gazprom would arrive in Lithuania on October 25 to discuss 
pricing with the GOL.  Navickas called 360 USD for 1,000 
cubic meters of gas a "tragic" price and noted that he had 
discussed gas pricing with the PM the day before. 
¶8.  (C) Navickas described for the Ambassador the GOL's plans 
to study liquefied natural gas (LNG) as an energy option for 
Lithuania.  An earlier idea by the GOL was for a terminal in 
Riga, Latvia.  Lithuania would have direct access to this gas 
via pipeline.  Last spring, Navickas sent letters to his 
counterparts in Latvia and Estonia proposing that they name 
candidates for an LNG working group.  Latvia, according to 
Navickas, did not propose any candidates and has no interest 
to meet to discuss this issue.  Navickas mentioned that when 
Prime Minister Kirkilas visited Latvia not long ago, he heard 
that the Latvians feel they have plenty of natural gas 
storage options for their needs and, thus, have no reason to 
investigate LNG.  Navickas then went on to say that the GOL 
might need to pursue LNG alone.  Hence, analyses should be 
done regarding where Lithuania could construct an LNG 
terminal.  Ignotas added that the GOL had already contacted 
USTDA regarding the construction of an LNG terminal and 
requested technical assistance with a study.  SAIC expressed 
its interest in performing this study, Ignotas said.  A 
likely place for the new terminal would be Klaipeda, 
Barriers To Investment 
¶9.  (C) Navickas said that economic relations between the 
U.S. and Lithuania are good but could be better.  The United 
States and Lithuania have approximately 20 bilateral 
agreements and treaties, which are a good basis for the 
countries' economic relationship, but the amount of FDI from 
the United States in 2006 (approximately 300 million USD) is 
not a considerable amount.  He added that the Lithuanian 
Development Agency, responsible for attracting FDI to 
Lithuania, will open an office in the United States. 
¶10.  (C) Navickas acknowledged that the issue of a SODRA 
(social security) payment cap is a long-standing challenge 
for Lithuania.  Despite support for the cap from business 
interest groups such as the Investor's Forum, negotiations 
with Lithuanian employers regarding this issue showed that a 
SODRA cap was not one of their primary concerns.  Instead, 
employers are mostly worried about taxation levels on low 
salary earners.  Navickas said he believes that employers' 
lack of concern regarding a SODRA cap is influenced by trade 
unions.  He opined that the employers do not understand the 
importance of the SODRA issue.  However, Navickas added that 
he would submit a new investment program to the PM and his 
cabinet within a week's time and that this program would 
include a SODRA cap. 
¶11.  (C) The Ambassador raised the long-standing issue of 
residency permits.  The soon-to-be submitted investment 
promotion program mentions the permits.  Navickas offered 
that amendments or changes need to be considered in the 
legislation covering residency.  He acknowledged that even 
the head of the Lithuanian Development Agency has experienced 
difficulties in obtaining a residency permit for his 
Argentinean wife.