Lithuanian Foreign Policy Review sat down with Dr. Agnia Grigas, who is a leading international expert on energy security and foreign policy, in order to talk about the future of the Nord Stream 2 pipeline, U.S. efforts to increase its natural gas exports to Europe and to discuss Lithuania’s energy policy achievements.
Dr. Agnia Grigas
© DELFI / Andrius Ufartas

One of your recent articles states that Nord Stream 2 is a 'Bad Deal for Europe', because it undermines Europe's energy security strategy and creates new security risks. You also note its impact on cyber and the export of corruption. What is your argument?

Agnia Grigas: Nord Stream runs counter to EU's official energy strategy because it fails to diversify EU's gas import sources and routes. Instead, it increases EU's dependence on Russian gas, and concentrates current gas importation routes through the expanding of existing Nord Stream pipeline. Such a concentration of imports along a single route makes supplies more vulnerable to technical malfunctions, cyber-attacks, and military accidents. Nord Stream 2 can also serve as a means for Russia to further export corruption and influence on German business and political life.

You also mentioned that there might be some cracks in the implementation of Nord Stream 2. Do you think it is going to be implemented? Is there anything countries like the Baltics or Poland could still do to defend their interests?

Washington has threatened to pursue sanctions against Nord Stream 2 and against Western companies involved in the project. They appear increasingly serious. The fact that [one of the] Nord Stream 2 participants, the German company Uniper, said that it would pull out of the project if the US implemented sanctions signals that there is a limit to the economic and political risks European companies are willing to bear for this project. Moreover, Nord Stream 2's decision to take an alternative route via Danish waters because of delayed approval by the Danish government to the initial route also signals potential problems for the project. Nonetheless, without sanctions from the US or a firm decision by the EU, Nord Stream 2 most likely will be implemented.

Europe has stated its goal to have a common energy policy. Do you see any real and tangible developments towards this direction?

There have been a lot of positive developments over the last two decades such as the Third Energy Package and successful implementation of the Southern Gas Corridor. However, until member states are willing to uphold the interests of the Union over their national interest groups, it will be difficult for Brussels to transform Europe's energy realities or to have greater leverage vis-à-vis energy suppliers such as Russia.

What is the policy of Trump's administration on gas exports? The President argues that he has done more than any of the previous administrations to make it happen.

The Trump administration has proclaimed America's "energy dominance" and is highly supportive of its LNG exports, which are perceived as a means to reduce the country's trade deficits. While Trump's administration has been more vocally supportive of the natural gas industry and outspoken about energy diplomacy, America's LNG exports started in 2016 under the Obama administration while the groundwork for the country's shale revolution was laid decades prior.

Trump expects Europe to become a massive buyer of American gas. However, we also see that European countries are still building pipelines. Do you see Trump's statement as a possibility in the near future?

The United States has surpassed Russia as the largest natural gas producer in the world and is expected to become the third largest LNG exporter in a few years time. American LNG has made its way to various European markets since 2016, including to Gazprom's commercial backyard of Poland and Lithuania, and it will continue to find demand in Europe. However, in Europe, American LNG will have to compete with Russian piped gas as well as LNG coming from a variety of sources including Norway, Russia, North Africa, Qatar and others. There is also the new Southern Gas Corridor which would bring Caspian gas to Europe, but volumes will be too limited at the start to make a significant impact. Overall, it is difficult to predict the market share US LNG will gain in Europe because it will depend on a variety of market conditions such as price, liquidity, seasonal demand, as well as on geopolitical conditions.

Lithuania has an LNG terminal. How do you evaluate this project? Is it economically viable? What are its perspectives -- taking into account global gas market developments?

Lithuania's LNG terminal is not only a commercial project but also a strategic endeavor ensuring national security. It has achieved the aims of diversifying Lithuania's imports, ensuring secure natural gas supplies, reducing Russia's leverage over Lithuania, improving the country's bargaining position vis-à-vis Gazprom, and allowing the country to participate in the growing global LNG trade. Thus, the project has been a success. Economic viability is difficult to assess because all new energy infrastructure is highly costly and needs to be regarded as a long-term investment, especially if comparing it to existing Russian pipeline infrastructure that does not require additional capital spending.

Besides the LNG terminal, Lithuania has recently implemented other huge projects, such as new electricity connections with Poland and Sweden. It also aims to synchronize power systems with continental Europe. What is your evaluation of Lithuania's energy policy in general? Are we moving into the right direction?

Absolutely. Lithuania's energy security efforts were somewhat delayed until the 2010s as previously the country was focused on other priorities such as EU and NATO membership. However, by today, its efforts have started to bear fruit and the country has escaped its status as an "energy island," and as a country that was previously dependent on Russia for 100% of its gas imports.

Dr. Agnia Grigas is a nonresident senior fellow with the Atlantic Council's Eurasia Center. She speaks and has published on issues concerning energy, security, foreign policy regarding Europe, the post-Soviet space, Russia, and the Baltic states. She is the author of three books: The New Geopolitics of Gas (Harvard UP, forthcoming 2017), Beyond Crimea: The New Russian Empire (Yale UP, 2016) and The Politics of Energy and Memory Between the Baltic States and Russia (Ashgate, 2013).

The article was published in the most recent edition of Lithuanian Foreign Policy Review, an annual magazine by Eastern Europe studies center in Vilnius, Lithuania. Access to the full publication - http://www.eesc.lt/uploads/Lithuanian%20Foreign%20Policy%20Review%202018.pdf

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