Latvia reclaimed its independence when the Soviet Union broke up in 1991.
Like its Baltic Sea neighbors Lithuania and Estonia, it now would like to become less dependent on Russia for its natural gas.
Diversification will be the key, Latvian Economic Affairs Minister Dana Reizniece-Ozola said at a July 14 Washington breakfast briefing hosted by LNG Allies. Russian gas giant Gazprom is using its still-dominant position to hold onto operations in other Eastern European countries as well as hers, she said.
"We have long-term supply agreements, which are good. But we pay more-up to 40% at some times of the year-for gas than, say, Germany," Reizniece-Ozola said. "It's imperative that discussions take place to bring more gas suppliers to Europe."
She said the European Commission is exploring gas storage capacity growth, which Latvia supports. It also works across borders on infrastructure, including more Baltic Sea LNG terminals.
"Our Lithuanian partners had such a bad situation with Gazprom that they did not wait for help from the European Union, but went ahead with their own project," Reizniece-Ozola said. "Gazprom responded with a 40% price decrease."
She said, "It was a turning point. Latvia is ready to support additional projects. Our colleagues in Estonia and Finland are moving ahead with projects." Latvia, meanwhile, is the only Baltic Sea country with geologic conditions favorable for gas storage.
What's needed, however, is a full legal framework for liberalized markets in the region. Reizniece-Ozola said Latvia's 20-year agreement with Gazprom is up for renewal in 2017. "The Economics Ministry has started to draft legislation, which Parliament must approve. But we also could use US support," she said.
Latvia formed a national gas company soon after independence, but Gazprom quickly acquired a 50% interest, Reizniece-Ozola said. Another Russian entity holds 49%, with the Latvian government owning less than 1%, she indicated.
"We have spoken with the EC about how to reach a much stronger privatization agreement," she said.
Behind closed doors
"Russia has been successful working with Latvian politicians," Reizniece-Ozola conceded.
"All of the work takes place in our ministries, but politicians make final decisions in the opposite direction," she said. "We are pushing to bring their deliberations out from behind closed doors because they always come out badly. We want to make them public so people can see what they're doing."
Latvia's strategy now is to divide its gas company into an underground storage and transmission company on one hand, and a distribution and sales unit on the other.
"It will be critical to attract new investors not related to Gazprom so other suppliers can start selling us gas," Reizniece-Ozola said.
