Viewing cable 09TALLINN110
Title: Estonia Hopeful but Expects Little from Baltic

09TALLINN1102009-04-24 14:21:00 2011-08-30 01:44:00 CONFIDENTIAL Embassy Tallinn
DE RUEHTL #0110/01 1141421
O 241421Z APR 09
C O N F I D E N T I A L SECTION 01 OF 02 TALLINN 000110 
E.O. 12958:  DECL: 04/23/2019 
SUBJECT: Estonia Hopeful but Expects Little from Baltic 
Energy Meeting 
Ref: (A) State 38591 
 (B) Riga 224 
 (C) 08 Tallinn 349 
Classified by: CDA Karen B. Decker for reasons 1.4(b/d). 
¶1. (C) SUMMARY:  The Government of Estonia (GOE) and 
Eesti Energia are hopeful the discussions at the April 27 
Baltic Prime Ministers' Council will be positive, but 
they don't expect concrete results this weekend.  Eesti 
Energia feels the new Lithuanian government does not 
grasp the complexity of the joint Visaginas nuclear power 
plant (NPP) project.  The MFA says the three prime 
ministers will issue a joint declaration after the 
Council meeting that will have a "nice statement on 
Visaginas that says nothing."  The declaration will, 
however, call for accelerated action on Swedlink, Estlink 
2, a Polish-Lithuanian interconnector, and regulation of 
third-party electricity imported into the EU.  Estonian 
energy policymakers agree that Russia's role in the 
region is unhelpful, and speculate "it will take a 
crisis" to jolt the Baltics into serious cooperation on 
energy diversification.  Estonia wants to cooperate 
closely with the United States on nuclear technology, 
including a possible USTDA Orientation Visit.  END 
Vilnius Summit: Hopeful, but Not Expecting Much 
¶2. (C) On April 24, Econoff delivered Ref A points to 
Estonian MFA Director for Energy Mati Murd, who 
highlighted three agenda items for the upcoming Baltic 
Prime Ministers energy meeting in Vilnius.  The PMs will 
discuss opening the Baltic electricity market - which 
will require Estonia to increase access to its market by 
35 percent.  They will also try to reach agreement on 
whether the proposed Swedlink cable should be an 
'infrastructure' project (owned by the state transmission 
companies) or a 'commercial' project (owned by the 
private power generation companies).  Finally, they will 
call for a common policy to regulate electricity imports 
from outside the EU (i.e. Russia).  Explaining the first 
point, Murd said the GOE's reluctance to lift electricity 
price controls is based on fear that an increase in 
energy prices in the short term could push Estonia's 
inflation over Maastricht limits and derail its bid for 
Euro accession by 2011.  Nevertheless, Murd said, Estonia 
will open its electricity market by 35 percent in early 
2010 at the latest. 
¶3.  (C) Murd noted that the EU's High Level Group on 
Baltic Energy has been "very constructive and very 
helpful."  Going into the April 26-27 summit, the GOE is 
"hopeful for progress on Visaginas, but not expecting 
agreement" on concrete details.  He expressed skepticism 
about the independence of other Baltic countries' energy 
policy.  While there is a clear divide in Estonia - with 
the GOE focused on long-term security and Eesti Energia 
on profitability - in Latvia, he said, "it seems 
sometimes that Latvenergo is setting the government's 
energy policy." 
¶4. (C) Murd provided Econoff with an advance copy of the 
working draft of the PM's Joint Declaration - to be 
released after the Prime Ministers' meeting (emailed to 
EUR/NB and Embassies Riga and Vilnius).  The final 
declaration will call for: 
-- an open, transparent integrated Baltic-Nordic 
electricity market no later than 2013; 
-- implementation of a Baltic-Swedish interconnection 
project - without delay; 
-- acceleration of the Estlink 2 project; 
-- an environmental impact assessment, plus financing 
plan, for a 1000MW Polish-Lithuanian electricity 
interconnection by March 31, 2010, with the link operable 
by 2015; 
-- an increase in the share of renewable energy; 
-- continued cooperation on the Visaginas Nuclear Power 
Plant (NPP) and 
-- preparation of a joint policy on electricity imports 
from third countries. 
¶5. (C) Murd commented that the point on Visaginas " 
very nice, but says nothing."  The final item on 
regulation of third-country electricity imports, he 
noted, still needs EU-level agreement and faces problems 
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with WTO compliance as well.  On the all-important 
practical questions surrounding Visaginas - including 
choice of a business model and identification of the 
rights and obligations of partner countries - Murd said 
he was doubtful the three countries will reach an 
agreement "...that will not be changed in a few months 
like the last one was."  (Note:  This refers to deviation 
from the February 2006 Trakai Declaration.) 
Energy Security for the Baltics 
¶6. (C) At an Embassy-hosted roundtable on energy 
security earlier in April, Eesti Energia's Head of 
Nuclear Power Programs, Andres Tropp, asserted "the new 
Lithuanian government has no understanding of how 
difficult building a new NPP will be."  As a result, 
Estonia continues to pursue other options, including 
building its own NPP.  The GOE is currently training 
several nuclear engineers in Sweden this summer, and 
hopes to send them to the U.S. in 2010.  This spring, 
Estonia will do geological studies for possible domestic 
site locations.  However, Tropp noted, Estonia still 
believes it has a 2-3 year window before it must commit 
to either Visaginas or a domestic NPP.  In that time, the 
GOE will continue to lay the legislative and regulatory 
groundwork, and see how serious Lithuania really is about 
a joint project.  Tropp also said he does not believe the 
GOLi's stated goal of completing a new NPP by 2018 is 
Looking Back: "Letting Gazprom In Was a Mistake" 
¶7. (C) At the same roundtable, the GOE also stressed that 
Russian involvement in regional gas and electricity 
markets seriously hampers diversification efforts.  The 
Ministry of Economy's Deputy Director General for Energy, 
Einari Kisel lamented the significant share Gazprom got 
in Baltic gas markets during the privatization of the 
sector in the early 1990s.  At that time, Russia 
effectively forced many central and eastern European to 
give Gazprom a stake in their markets or do without its 
gas.  While Estonia has not suffered cutoffs in gas 
supply, Kisel asserted that "letting Gazprom in was a 
mistake."  Gazprom's stake in national utility companies, 
(it owns 37 percent of Eesti Gas) and as owner of the gas 
in Latvia's Inchulkans underground storage site, now 
complicates regional efforts to diversify away from 
Russian influence.  Although Russia periodically talks 
about investing in new infrastructure projects such as 
gas pipeline interconnections or a nuclear plant in 
Kaliningrad, it never actually does anything to move 
these projects forward.  Kisel felt that such discussions 
are simply intended to discourage any serious local 
efforts on such projects.  Commenting generally on the 
lack of Baltic energy cooperation, Tropp of Eesti Energia 
said the Baltics will "need a crisis to spur action."