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Latvian report
by Euro Reporter
2015-05-18 10:16:47
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Latvia's forest gas storage to shape Baltics energy balance

Buried under heavy clay deep in the Latvian birch forests, sit the giant Soviet era gas reservoirs whose fate draws together the main players in the tense energy power game of the Baltics. A share in the site is for sale, which will dent Russia's influence. The asking price from the German stake-seller deterred Latvia itself from stepping in, leaving a European Commission-linked fund as the only bidder, government sources say. Looking on are Latvia's Baltic neighbours, who are at least as keen to cut their reliance on Russian gas. The site's capacity is enough to see Latvia and also Estonia through the winter, while Lithuania hopes to use it to hold some of its gas imports. Beginning in June, the Latvian parliament will start debating its draft law to split Latvijas Gaze, the operator of its prize energy asset, into two, bringing it in line with EU liberalisation law. The storage facility minimises the need for pipelines as gas is injected during the low demand summer season and withdrawn during the winter. Latvijas Gaze's main shareholders are Russia's Gazprom , with 34 percent, which provides the gas and Germany's E.ON, which has said it will sell its 47.2 percent stake. Gazprom has not disclosed any plans.

latvia_400E.ON has been progressively selling assets. Last year, it sold a 38.9 percent stake in Lithuania's gas company and also in its grid. The sale netted 113.2 million euros ($128.78 million), a discount of 15 percent to the market value on the Vilnius exchange. For its stake in Latvijas Gaze, E.ON asked for 220 million euros, government officials said, after the Latvian government submitted a non-binding offer to buy it in September last year. The government said that price was too high. Now government sources say the Marguerite Fund is the exclusive bidder. The equity fund and E.ON decline to comment. "There is an uncertainty about the proposal for legislation and most probably the Marguerite Fund takes it into consideration, but I believe there won't be anything to make Marguerite rethink its plans," one government source, speaking on condition of anonymity, said. He said it was hard to judge the price, but his impression was "lower than 220 million euros".

Set up under Luxembourg law to invest in strategic EU energy projects, the Marguerite Fund has the backing of the European Investment Bank and the European Commission. The details are unclear, but the government has said Latvijas Gaze will be divided into two: one company for sales and distribution, and another to hold the strategic infrastructure. Latvijas Gaze says maintaining the existing monopoly is the best solution, but accepts it will have to conform to EU law once Latvia's derogation ends early in April 2017. Both sides have a point, analysts say. Latvian gas demand has plunged with the collapse of industry, falling to around 1.3 bcm from nearly 3 bcm in 1991. Efficiency and renewable energy could cut demand further.

"If these member states physically connect their markets, the aggregate demand could be enough to spur investments and get some competition going," said Tim Boersma of the Brookings Institution in Washington. But he added the Baltic States could be an instance of a region that "cannot avoid paying some form of a premium to safeguard energy security". Lithuania has weakened Gazprom's dominance by investing in a liquefied natural gas (LNG) terminal, which has allowed it to negotiate cheaper prices, but over time could augment them given the added costs of LNG versus pipeline gas, analysts say. It wants Latvia to liberalise, as it has done, to fire up a regional market and Lithuania hopes that at some point its LNG will be among the gas pumped into the Incukalns storage. This year's injection season begins late in May, a month later than usual following a mild winter.


Latvia installs NATO air defence radar system

AN/TPS77, a mobile version of Lockheed Martin's AN/FPS-117 3D air search radar, has been installed some 115 miles west of Riga near the Baltic Sea port city of Ventspils. Its objective is to improve control over Latvian airspace, and that of other Baltic states, the Latvian newspaper Neatkariga Rita Avize reported. According to the outlet, identical radar systems have been installed in the eastern Latvian cities of Rezekne and Lielvarde, 147 and 33 miles southeast of Riga respectively, thus allowing the national armed forces to fully monitor the entire Latvian border.

Latvian National Armed Forces Commander Raimonds Graube underscored the radars' importance, given Latvia has been a NATO member since 2004 and is on track to spend the military alliance's benchmark 2 percent of GDP on military by 2020, the country's defence minister, Raimonds Vejonis, told Sputnik late last month. A decision to establish NATO's rotational presence in Eastern Europe and the Baltics was reached following the bloc's 2014 Wales summit.

Vejonis also told Sputnik during a visit to Washington, DC that he plans to request a permanent NATO troop presence in the Baltics from US officials. Russia views a permanent NATO troop deployment in these countries to be a violation of a 25-year agreement precluding the alliance's advancement toward Russia's western borders.


Latvia should support refugee quotas for sake of solidarity

Demographic analyst and migration expert Ilmars Mezs, in an interview with LETA, said that Latvia should support refugee quotas for the sake of solidarity, and because it would have to take in only several dozen immigrants anyway. He said that the approximate number of refugees that Latvia would have to accept if the quota system was passed is so small that the current concern is "inappropriate".

The number of quotas can be calculated according to the gross domestic product, thus, Latvia would have to accept about ten people. However, taking into account other specific considerations, Latvia would have to provide for a total of several dozen, said Mezs. He stressed that no one can force Latvia to accept 1,000. The expert indicates that this is a voluntary quota system, which helps countries such as Malta where the refugee issue is complicated. "Of course we can help with specialists and equipment, but this will not solve Malta's dilemma," added Mezs.

For the sake of solidarity, the refugee quota system should be supported, as it would serve to help Latvia in the future if such a need arose. "If we start facing thousands of refugees from the east, we will want solidarity then," said the expert. He pointed out that in this regard there are less expectations from Latvia, and more from, say, Great Britain – a much larger country. Mezs also believes that former colonial states, such as Britain, Spain and others, should take moral responsibility here, as they abused the territories and resources owned by refugees for many years for their own well-being.


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