EU NEEDS TO DIVERSIFY ITS ENERGY SOURCES AND SUPPLY ROUTES

 

Caspian Energy (CE): What is the basis of Europe's energy security from Latvia's perspective? What issues need to be addressed?

Vaira Vike-Freiberga, President, the Republic of Latvia: The EU and its member States need to do several things to ensure their energy security. First, they need to create a physically integrated and common energy market. This means that work must continue to interconnect isolated, regional energy markets. The Baltic States (Latvia, Estonia and Lithuania) represent one such "energy island" of the EU, with a limited connection of their electricity grids and gas pipelines. The only connection between the Baltic States and other EU members is the electricity link that was recently established between Estonia and Finland, in December of 2006. Other important links between Lithuania and Poland and between the Baltic States and Sweden are still in the planning process.

The common EU energy market, once it is established, must also be genuinely competitive. Currently the existence of energy-supplying monopolies in several EU member States, including Latvia, is not conducive to competitiveness in the energy field.

Furthermore, the EU needs to diversify its energy sources and supply routes to avoid an over-reliance on a small number of suppliers. At the same time, the EU member States themselves need to do what they can to increase their self-sufficiency and to reduce their energy dependence on foreign suppliers. Energy saving measures and the wider use of alternative sources of energy are other aspects that need to be developed. Several EU Member States, including the Baltic States, now are also taking a fresh look at the use of nuclear energy, although public opinion remains quite divided on this issue.

 

CE: Can the EU today become a uniform political force? Would you agree with some experts, who say that there is no common strategy in the EU on many issues, including energy security?

Vaira Vike-Freiberga: Over the past 50 years, the EU's member States have established a common ground regarding a great many issues and this has created a firm foundation for the EU to become a uniform political and economic force. There are international forums, such as the WTO, where the EU already speaks in one voice. The EU has become the world's largest economy, but clearly, its member States still need to do more to strengthen the EU's role on the world stage. The EU's ability to become a more coherent political force will depend upon the goodwill of each of its member States and on further improvements in the EU's decision-making processes.

Energy security remains an especially challenging issue for the EU, which still lacks a common EU energy policy. While certain EU measures have been adopted on liberalization, renewable energy and energy efficiency, these cannot be described as a coherent set of inter-linked policies. One example where a common strategy was needed, but unfortunately not present, was the decision to build the NordStream pipeline from Russia to Western Europe through Finland and Germany, along the bottom of the Baltic Sea. Latvia is involved in the environmental impact assessment of this project, for we believe that a serious evaluation of the potential dangers to the environment and to the Baltic Sea must be conducted.

 

CE: Is it correct to consider Russia as a "dangerous factor" for other countries, particularly Latvia, with regard to energy dependence, as EU's Energy Commissioner Andris Piebalgs has claimed?

Vaira Vike-Freiberga: Latvia is highly dependent upon Russian energy. We currently have no alternative to Russian gas, which accounts for up to 30% of our primary energy resources. We also import 10% of our electricity from Russia, in the secondary energy resource market.

Latvia does have one major energy asset that is of use to Russia and her neighbours - our unique, underground gas storage facility in Incukalns. This facility is connected to Russia, Estonia and Lithuania through a gas pipeline network and is used to supply Estonia and St. Petersburg with natural gas during the winter. The gas is pumped into our facility from Russia during the summer months, allowing us to be autonomous during the winter, when the gas is needed the most.

Russia is our principal energy supplier and I am happy to say that to date we have had no problems with deliveries from our eastern neighbour. Nevertheless, we think that it would be prudent to diversify the range of our suppliers and are very interested in cooperating with other energy producers, such as Azerbaijan.

 

CE: While the Baltic and Caspian regions are geographically distant, globalization, along with a common desire to strengthen our nations and their independence, is bringing the Caspian and Baltic countries closer together. This was also evidenced by your successful visit to Baku in 2005 and by the return visit of President of Azerbaijan Ilham Aliyev to Latvia in 2006. What future do you see for cooperation between the two regions?

Vaira Vike-Freiberga: Geographic distance no longer presents the barriers that it once did to cooperation between countries that are far apart. Despite the distance that separates them, the Baltic States and the countries of the Caspian region share certain similarities. Our common history of Russian and Soviet domination, along with a shared desire for independence, are uniting factors. During the last decade, Latvia's main goal was to reintegrate into the Euro-Atlantic community. Now that we have achieved that goal, we can devote more efforts to intensifying our relations with our Eastern neighbours, including the countries of the Caspian region.

This is a priority for Latvia, as evidenced by the recent increase in cooperation between Latvia and Azerbaijan. My visit to Azerbaijan in 2005 and the return visit of President Ilham Aliyev to Latvia last year are notable examples of a growing mutual interest. I believe that we still need to establish closer links in a number of areas. We need more active people-to-people contacts and stronger cultural links. We need to promote tourism between our countries and strengthen our economic relations, which includes cooperation in the field of energy resources. Latvia is also ready to share its reform experience with the countries of the Caspian region, including Azerbaijan.

 

CE: Which Caspian countries are viewed as the closest to Latvia and what are the dynamics of the relations between Latvia and Azerbaijan?

Vaira Vike-Freiberga: Latvia, as a member of the EU and the NATO, attaches great importance to increased co-operation with its eastern neighbours. We have established good relations with the Caspian countries, and currently Azerbaijan, Georgia and Kazakhstan are our closest partners in that region.

During last few years, Latvia's relations with Azerbaijan have been very active and constructive. Diplomatic representations have been established in both of our countries. Direct flights now operate between Riga and Baku. We hold regular political consultations and our inter-parliamentary relations are very strong. There are regular and sustainable contacts between different Latvian and Azerbaijani State institutions in the areas of defence, economics, finance, transportation, information technologies, education, health and others. A strong legal basis has been established for further cooperation between Latvia and Azerbaijan.

Azerbaijan is participating in the EU's European Neighbourhood Policy. Through this framework, Latvia can share its experience of integration into the EU and NATO with Azerbaijan. I believe that such exchanges could also facilitate the dialogue between Azerbaijan and the EU and NATO.

 

CE: Is it necessary to boost the investment activity of Latvia in Azerbaijan and Kazakhstan and other countries of the region?

Vaira Vike-Freiberga: The first 16 years since Latvia regained its independence have been marked by a massive influx of foreign direct investment into the Latvian economy. This has helped to increase Latvia's competitiveness and to stimulate a remarkably rapid GDP growth rate, which, at almost 12 %, is currently the highest in the EU.

Latvian entrepreneurs are becoming more active in investing abroad and they are very interested in co-operating with Azerbaijan and the other Caspian countries. Our shared history, contact networks and traditions of doing business, as well as our common knowledge of Russian as a lingua franca provide an excellent platform for the expansion of Latvian investments in the Caspian region. Financial services, ICT, transit and logistics are among the most promising sectors with lucrative opportunities for Latvian investors.

 

CE: How would you evaluate the recent statement of President of Russia Vladimir Putin regarding Russia's aspiration for a multi-polar world system where "small countries would be protected from the oppression of large world powers?" Is Latvia experiencing the effects of such plans from Russia today?

Vaira Vike-Freiberga: Latvia does not attach great importance to the issue of uni-polarity or multi-polarity. We are proud to belong to the Western community, which is first and foremost based upon common and shared values such as freedom, democracy, the respect for human rights and the rule of law. This community has established effective cooperation tools such as the EU and NATO. Latvia does not feel abused by its bigger partners and does not need any protection from outside of the EU and NATO. We support an effective global system of justice and protection within the UN framework, which, clearly, still has a number of shortcomings that need to be addressed. We regard the experience of the Western countries in building democratic societies as a positive example that will hopefully serve as an inspiration to others. We are ready to help those who seek to follow our example and to pass on our experience.

 

CE: Do you agree that expanding the EU imposes a threat on the so-called multi-polar democratic world propagated by European politicians?

Vaira Vike-Freiberga: I cannot agree with this view. Enlargement has been a driving force of the EU's development over several decades. The very essence of European integration has been to overcome divisions and to contribute to the peaceful unification of the continent. Politically, the EU's enlargement has helped several countries to respond to such major changes as the fall of dictatorships and the collapse of communism. Enlargement has consolidated democracy, human rights and stability across the continent.

The EU's enlargement should not be perceived as a threat to a multi-polar democratic world, but rather as a means of enhancing security by ensuring the spread of stability and peace across Europe. We encourage our neighbouring countries to continue the political and economic reforms that they have undertaken to strengthen democracy, the rule of law and the respect for human rights.

 

CE: What are your expectations reading Germany's chairmanship of the EU and what steps should it take to strengthen the organisation?

Vaira Vike-Freiberga: The German EU Presidency is occurring at a very significant time for the entire EU. This year the EU and its member states are celebrating the 50th anniversary of the signing of the Treaty of Rome, which paved the way for the establishment of the European Union.

As we look back on the EU's achievements, we are also seeking to address such pressing current issues as illegal immigration, terrorism, energy security, increasing competition from abroad, stagnating economies in some EU member countries and ageing populations.

Germany has assumed the difficult task of consolidating a common position among the member States on a future Constitutional Treaty. I hope that Germany's proposal for a "road map" and timetable for resolving this issue will be agreed upon by the member States in June of this year.

Under Germany's presidency and in the years to follow, the EU's member States should also devote serious attention to improving the functioning of the EU, and on making its institutions work more effectively and transparently. This, in turn, will help to raise the EU's global competitiveness and strengthen its external dimension, providing that all 27 of the EU's member States muster the required political will to assume the full responsibility of reinvigorating the organisation.

 

CE: What is Latvia's position regarding Turkey's potential accession to the EU?

Vaira Vike-Freiberga: Latvia supported the EU's decision in 2005 to open accession negotiations with Turkey. Given that Turkey already meets many of the Copenhagen criteria for membership, Latvia hopes that Turkey will eventually be invited to accede to the EU.

The prospect of EU membership is a good impetus for Turkey to continue its political and economic reforms, and to strengthen democracy, the rule of law and the respect for human rights. A democratic, developed, prosperous and stable Turkey is in the interests of the EU.

Taking into consideration such factors as Turkey's substantial population, the size of its territory, strategic geographical location, growing economy, military potential, rich cultural heritage and other assets, Turkey could contribute significantly to increasing the EU's role in the world and in promoting regional and international stability. Turkey is a neighbouring country of several Middle East states and has an influential presence in the region. Turkey's EU membership would therefore allow us to promote security and enhance the EU's political and economic relations in the Middle East.

Turkey's EU membership would also give a positive signal to the Islamic world and would show that Christians, Muslims and other religions can co-exist under the values of democracy and freedom.

No doubt, there are issues regarding Turkey's accession to the EU that people in many EU member states are concerned about. Among the most widespread are Turkey's large size, its Muslim religion and culture and a possible increase in the flow of immigrants to other EU countries. People also fear that Turkey's accession would place an additional strain on the EU's cohesion policies and affect the EU's institutional balance.

Some of these concerns are not well founded and are based mostly upon prejudices and misconceptions. Therefore, it is important to have a real discussion about these issues. Turkey needs to continue the work that it has begun to meet the necessary criteria for membership to the EU. This might take a number of years. The EU, on the other hand, has to decide on its future makeup, including further enlargement, and must implement some crucial institutional and financial reforms to function more efficiently.

 

CE: Is Latvia, along with many European countries like Germany, Belgium and the Netherlands, going to shift its economy to alternative power engineering by 2020?

Vaira Vike-Freiberga: More than one third (36%) of the energy produced in Latvia is already through alternative and renewable resources, mainly hydropower. Nearly half (48%) of the electricity produced in Latvia comes from alternative resources. Latvia is already ahead of its European neighbors in the use of alternative power and we wish to continue developing our alternative power capacity.

At the same time, Latvia's rapidly growing economy has been requiring increasing amounts of energy. Part of our energy is currently provided by the Ignalina nuclear power plant in Lithuania, which is to be closed down by the end of 2009. This means that we will have to find other energy sources to meet our increasing energy needs, while simultaneously applying energy-efficient technologies to stem the increase in our consumption and reduce greenhouse gas emissions. We also need to attain the highest possible degree of energy independence so as not to be overly reliant on a small number of energy suppliers.

 

 Thank you for the interview