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FOI-R--3990--SE
and natural gas supplies. The construction of a second power unit at the Riga
TEC-2 thermoelectric power plant, completed in December 2013, means that
Latvia is now capable of fully providing itself with electricity. Although the new
capacity from TEC-2 makes it possible not to buy electricity from neighbouring
countries, it generates electricity using natural gas purchased from Russia. This
situation is not satisfactory from an energy security perspective. There is a risk
that the lack of alternatives might be used in pricing policy and as a means of
political pressure.
The Latvian government has so far not been very active in searching for
alternative natural gas suppliers. One reasons for this is that the 20-year
agreement between Latvia’s national gas company, Latvijas Gaze (LG), and
Gazprom, signed in 1997, specifies that Gazprom has a monopoly over the
natural gas infrastructure and supplies to Latvia. The contract runs to 2017. Until
then, it grants LG exclusive rights to purchase gas, and to ensure gas
transmission, storage, distribution and sales. A major factor inhibiting Latvia’s
gas market liberalization is the Gazprom lobby. 345
Since the final privatization of LG in 2002, the company has been owned by
three major shareholders: Gazprom (34 per cent), E.ON Ruhrgas International
GmbH (47.2 per cent) and Itera Latvia (16 per cent). Itera Latvia allegedly sells
gas from Turkmenistan to Gazprom Export – a daughter company of Gazprom.
Latvia’s plans for the liberalization of the gas market are consistently opposed by
Gazprom and Itera Latvia, despite the fact that such reforms are needed to bring
Latvia in line with EU directives known as the Third Energy Package (TEP).
Latvia has limited control over its natural gas sector and its regulations cannot
prevent a monopoly. Only implementation of the TEP can resolve this
situation. 346
4.7.1 Gas Market Liberalization in Latvia
The issues of energy security and Latvia’s excessive dependence on Russian gas
and oil became particularly important topics in the light of the Russian-Ukrainian
gas conflict of 2006–2007 and during the 2009 gas dispute. The discussion
sprang up again in the spring of 2013, when the requirement to implement the
EU TEP provided a chance to liberalize Latvia’s gas market. According to the
TEP, Latvia had to liberalize its gas market by April 2014. Latvijas Gaze should
split its gas transportation and storage functions from its gas supply and
marketing. In addition, market participants must be given access to pipeline
networks.
345 See “CPB: Gazprom has been preparing for hindering of natural gas market liberalisation in
Latvia”, TVNET/BNS, 8 March 2013, http://www.tvnet.lv/zinas/latvija/456445-
sab_gazprom_ilgi_gatavojies_pret_gazes_tirgus_liberalizaciju_latvija.
346
Zeltins A. (2012): op. cit. p.129.
107