LATVIAN OPTIMISM ON BALTIC ENERGY MEETING

C O N F I D E N T I A L RIGA 000224

SIPDIS

E.O. 12958: DECL: 04/21/2019
TAGS: ENRG PREL PGOV ECON LG
SUBJECT: LATVIAN OPTIMISM ON BALTIC ENERGY MEETING

REF: SECSTATE 38591

Classified By: CDA Bruce Rogers for reasons 1.4 (b) & (d)


1. (C) Summary: The Latvians are optimistic about the
potential for movement on long-delayed energy interconnection
plans in the meeting of Baltic prime ministers scheduled for
April 26-27. The Prime Minister's office expressed hope that
the meeting would yield a breakthrough "comprehensive
agreement on political issues." The foundation of such an
agreement would be commitment to open markets, but they were
not able to provide much detail on what had lead to agreement
on contentious issues. Given comments from other observers,
post thinks this view may be overly rosy. End Summary.


2. (C) On April 21, Acting DCM delivered reftel points to
Juris Stalmeisters, foreign policy adviser to Prime Minister
Dombrovskis. (Further discussion of the points with MFA
representatives is planned for later in the week.)
Stalmeisters indicated that a conclusive political agreement
was a possibility, to the extent that only technical
follow-up would remain. The keys to such an agreement would
be open markets in all three Baltic countries, and free
access by all the Baltic States to any external connection,
such as the disputed electric connection to Sweden
("Swedlink") and especially a link between Lithuania and
Poland.


3. (C) Stalmeisters noted that the key would be convincing
Estonia to open its electricity market earlier than required
by its derogation, which lasts until 2013. The Latvians
claim that they are in an unfair position because their
electricity market is open to their neighbors, but their
neighbors' markets remain closed to them. Stalmeisters said
their goal is for the Estonians to agree to open 35% of their
market by the end of the year. (He also suggested that the
Finns are pushing for complete opening as a condition of
going ahead with the Estlink II project). He backed off of
earlier GOL arguments in favor of a combined Baltic
Transmission System Operator (TSO),describing that as a
"long term goal."


4. (C) However, significant doubt about this issue remains.
Juris Ozolins, Special Adviser to Energy Commissioner
Piebalgs, claimed in a meeting with EconOff on April 20 that
the Latvian position on this issue is not well-founded. He
pointed out that Latvia is a net importer of electricity, and
it does not make sense from a regional policy perspective for
them to demand further opening of the Estonian market based
on nothing more than the hope that Latvia one day will have
enough capacity to be a net exporter. He also called Latvian
plans for a regional TSO naive in their hope that such a body
could actually be apolitical.


5. (C) Comment: The Latvians' positivity was refreshing, but
perhaps a bit over-optimistic. It may indicate increased
willingness of the GOL to allow Swedlink to connect to
Lithuania if there are sufficient guarantees of access and
openness. However, Stalmeisters did not offer evidence of
what had shifted to make a deal possible now. It is possible
that the Baltic States are getting pressure from the EU to
come to an agreement. However, if Ozolins's statements are
representative of the Energy Commissioner's, Latvia's
solution to the disagreement may not have broad support.
ROGERS