Lithuania’s energy dependence on Russia is one of the highest among the European countries, as it paid over 3 billion euros for Russian oil, gas and electricity last year. But Lithuania could easily renounce Russian gas and electricity, according to analysts.
However, it would be more difficult to do the same with oil because the oil refinery in Lithuania’s Mazeikiai, the only oil refinery in the Baltic States, is adapted to Russian oil specifically.
As countries around the world are imposing increasingly tougher economic sanctions on Russia in response to its war in Ukraine, some politicians and economists are calling on Germany and other countries, that are highly dependent on Russian energy resources, to renounce Russian oil and gas.
In Lithuania, Russian oil is bought by Orlen Lietuva, the oil refinery owned by Poland’s Orlen. Also, Russian gas is bought by the state-owned gas supplier Ignitis and the Jonava-based nitrogen fertilizer producer Achema, as well as some smaller gas suppliers.
Moreover, Russian electricity is bought by Inter RAO Lietuva, an electricity company owned by the Russian electricity giant Inter RAO. None of these companies disclosed how much they paid for these resources to Russian companies.
Swedbank economist Nerijus Maciulis estimated that Lithuania paid some 2.7 billion euros for Russian oil products last year, with an additional 140 million euros spent on Russian gas and 180 million euros on Russian electricity.
According to Luminor bank economist Zygimantas Mauricas, Lithuania’s energy dependency on Russia is probably the highest in the EU, which is reflected in the international trade figures, showing that the country imports way more oil, gas, and electricity than it exports.
“In the fourth quarter of last year, the oil product trade deficit exceeded 400 million euros, and there were some 300 million euros on natural gas, and the record-high expenses on electricity, standing at around 400 million euros,” Mauricas said.
“If we continue to move at this pace, the negative balance could stand at 4 to 5 billion euros this year, amounting to almost 10% of the GDP, which is a lot, and is 2.5 times more than the financial assistance received from the EU,” the economist added.
Lithuania’s state-owned Ignitis, which buys Russian gas, said Gazprom gas amounted to less than a third of the country’s gas portfolio last year, and the share was going down, as the company was buying more liquefied natural gas (LNG) from other sources.
“For example, we bought zero gas from Gazprom in January. We have also ordered non-planned shipments, and one of such shipments arrived from the United States in early February, and we also plan to have more of those non-planned shipments in the short-term,” Ignitis said.
But Lithuania could renounce Russian gas and electricity completely because the country is ready to do so and has the necessary infrastructure for it, according to the economist Maciulis.
“The majority of natural gas consumed in Lithuania is imported via the Klaipeda-based LNG terminal, and a quarter of all consumed gas is bought from Russia. The terminal and other infrastructure have sufficient capacity for Lithuania to be able to renounce Russian gas completely,” he said.
Speaking of Lithuania’s possibilities to buy oil elsewhere, Mauricas said it could be done via the Butinge terminal and intermediaries, but that would cost more. Therefore, he does not expect Russia to be eliminated from this market in the near future.
“I don’t think such a scenario is realistic, to cut oil supply from Russia completely. It seems that the West, having imposed tough sanctions on Russia, left the partial possibility to buy raw materials, including oil, and to pay for them. The market is global, and eliminating such a player from it would be a major blow,” the economist said.
If Lithuania renounced Russian oil, that would mostly cause problems for Orlen Lietuva, as it would be forced to make adjustments to its Mazeikiai refinery and adapt to a different type of oil, according to analyst Marius Dubnikovas.
“Oil would cause problems for the Orlen plant, as it refines Russian oil. I think it would take time for the plant to make adjustments to a type of oil with lower sulphur content, as Russian oil has a high level of sulphur,” he said.
Last year, Michal Rudnicki, CEO of Orlen Lietuva, said the Mazeikiai plant was using almost 80% of Russian oil, adding that the company could not renounce it immediately.
This year, Orlen Lietuva is starting to implement a project, worth 641 million euros, upgrading its residue hydrocracking facility and adapting the refinery for non-Russian oil.
According to Politico, the EU paid $64 billion for Russian oil and gas in 2020, which almost matches Russia’s defense budget for that year. (LRT/Business World Magazine)
