For decades Gazprom held sway over Latvia’s political system, but the country’s economic minister is optimistic that energy market reforms will help break Russia’s stranglehold on natural gas supplies.
Economic Minister Dana Reizniece-Ozola has hope Gazprom’s dominance over Latvia’s energy supplies will fade, but what the country needs most is political support from allies, like the U.S., that alternative gas supplies will be available in the near future.
“They’ve been very strongly working with the politicians, with the decision-makers, convincing them not to open the market,” Reizniece-Ozola told The Daily Caller News Foundation. “The instruments have always been found.”
“I would say that the public society is helping us to open the market,” said Reizniece-Ozola, who is also a chess grandmaster, “but it’s very important to have political support from our allies, from our political friends, and to get some real signals that there might be alternative supplies.”
Reizniece-Ozola, speaking at an event on liquefied natural gas exports in Washington, D.C., Tuesday, said Gazprom has successfully blocked proposed reforms to open up Latvia’s energy markets to competition since 2002. But with reform now on the way, Latvia needs the U.S. and other allies to support its efforts.
“It’s easy to refuse getting gas from Russia, but we need to be on the safe side and have alternatives,” she told TheDCNF. “Buying only from Russia we are standing only on one foot. It’s always better to stand on two.”
Latvia regained its independence in 1991 after the fall of the Soviet Union, but even though the communists left, the Kremlin still controls the country by keeping it dependent on natural gas supplied by the state-owned Gazprom. Latvia got 100 percent of its gas from Russia in 2014.
Latvia is largely isolated from the European Union’s energy grid, and Gazprom has taken advantage of that fact. Russians have gouged Latvia with high gas prices for years, gas prices that can be up to 50 percent higher than spot market prices during the summer months.
To complicate matters Gazprom and Russian businessmen own 50 percent of Latvijas Gaze, Latvia’s publically-owned gas company.
“They have been very active and successful in working with Latvian politicians,” Reizniece-Ozola said, referring to the Russian energy giant.
But things changed in 2012 when energy security became a priority for the European Union, of which Latvia is a member. Energy security concerns were accelerated last year when Russia annexed Crimea and launched military incursions into Ukraine. Russia was able to use its position as Europe’s major natural gas supplier as a way to keep the west from intervening in Ukraine.
Latvia passed energy market reforms in 2013 to open up Latvia’s gas market to competition and requiring Latvijas Gaze to allow third party access to its energy distribution infrastructure. Latvijas Gaze opposed the reforms and politicians postponed market change-ups until 2017, likely due to Russian lobbying.
Public pressure for energy reforms to bring down high gas prices has helped push politicians to push through some reforms. In March, Latvian cabinet ministers agreed to set up a sister company to Latvijas Gaze that would control access to the country’s gas transmission and storage system by next year. That sister company would become fully independent from Latvijas Gaze by 2017.
Interestingly enough, by early June, Aidrians Davis, the CEO of Latvijas Gaze, announced his resignation three months before his contract with the company was set to expire. The company’s profits had fallen 71 percent in the first quarter of 2015, but Reizniece-Ozola said Russian shareholders likely forced him out.
“This time he has failed in keeping the strict position of the Gazprom,” she said. “In individual and personal talks he has been telling me that promises given by politicians have not been kept, and this is why he now refuses to continue.”
“But I think this is the reason he has been forced to resign — the opinion of the shareholders is that he has failed,” the economic minister said. “Nevertheless, he had been very successful for almost 20 years.”
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