Implications Of Russia-Ukraine War On Baltic States’ Energy Transition – Analysis


The Baltic states, including Estonia, Latvia, and Estonia, are located in the northern-eastern part of Europe and share territorial boundaries with Russia on the eastern side. These countries were part of the erstwhile USSR and gained independence in 1991. Baltic states lack sufficient locally available energy resources and diversification of energy supply; consequently, they depend on energy imports, especially from Russia.

All three Baltic states joined the EU in 2004 to improve energy security and diversify energy supply. Their move to the EU did not bring the expected outcome as they remained largely dependent on the Russian supply. Until the start of the Russia-Ukraine conflict in February 2022, the Baltic states were entirely energy-dependent on Russian energy supplies. Such massive energy dependency on Russia was considered a threat to their national security. However, after the start of the conflict, despite their reliance on the Russian energy supply, the Baltic states were among the first to decide to cease energy imports from Russia. The Russia-Ukraine conflict seriously impacted the Baltic states’ energy security as it brought significant policy-level changes to the Baltic states. 

In 2021, the total combined natural gas consumption of the Baltic states was approximately 4 billion cubic meters (bcm), wherein Estonia (0.5 bcm), Latvia (1.5 bcm) and Lithuania (2.3 bcm) shared respectively. Compared to 2020, there was an increase in supply by 1%. In April 2022, Baltic states stopped importing Russian natural gas. Existing energy infrastructure in the Baltic states enabled them to stop Russian supplies. These energy infrastructures are LNG terminal Klaipeda, Estlink 1 and 2, Gas Pipeline Poland and Lithuania (GIPL), NordBalt, and Incukalns gas storage facility. 


The ongoing Russia-Ukraine conflict increased energy prices unexpectedly at the global and the EU level. In 2023, Estonia spent more than 40 % on energy purchasing compared to September 2022. The conflict hit the Estonian economy badly. As per Eurostat, in September 2022, there was a 24.2% annual inflation rate. Since the conflict escalated in February 2022, Estonia continuously faced severe inflation, which remains the highest in the EU. After the start of the conflict, Estonia took a daring step and curbed most of the import of Russian energy supplies.

Before the conflict, the import of refined petroleum and natural gas from Russia was 55% and 95% of Estonia’s total import of these resources. After one year of the conflict, Russia’s energy resources supply was significantly reduced to 5% and 7%, respectively. Reducing Russian energy supplies (mainly gas) and replacing it with coal and other polluting fuels increased the energy price in Estonia

After the conflict – to ensure a proper energy supply and replace Russian imported energy- Estonia sped up the initiative to build a Liquified Natural Gas (LNG) terminal at Paldiski. However, the proposal for the construction of LNG at Paldiski came long before the February conflict (2017). The construction of the first LNG dock will be completed in October 2022. It is still under construction, and it is believed that the terminal will be connected to electricity and gas transmission system operation after the completion of the terminal. This new LNG terminal will help Estonia diversify its energy supply, especially when all three Baltic countries try to prohibit Russian energy resources.  


For Latvia, the Russia-Ukraine conflict and its international reaction exposed several domestic weaknesses, including the energy sector. Latvia’s response to the conflict explicitly advocated the EU’s economic and energy sanctions on Russia. Since independence, Latvia’s electricity system has depended on the Russian-controlled BRELL (Belarus, Russia, Estonia, Latvia and Lithuania) system. Latvia’s power grid is not synchronized with continental Europe’s, making it vulnerable as Latvia is totally dependent on Russia. Within a few weeks of the start of the conflict, in March 2022, Latvia’s parliament Saeima agreed to prepare legislation aiming at a permanent ban on the import of electricity from the BRELL power grid by 2025.

In the autumn of last year, Latvia experienced the highest prices for purchasing natural gas and electricity. This led to a decrease in demand and consumption of natural gas. Compared to 2021, demand for natural gas decreased by 38 per cent in the first half of 2022. However, sudden energy efficiency measures and aid by the Lithuanian government have a positive impact on reducing the energy price impacts on enterprises and domestic households. 

Due to an unexpected surge in energy prices, inflation in Latvia remained above 20 per cent in mid-2022. As per Latvijas Banka, the increase in energy prices for businesses and household sectors cost approximately €1.7 billion in 2022. The Latvian government’s partial compensation for energy prices decreased inflation, and economic activities increased. To reduce the impact of the energy crisis in sectors such as electricity, gas, heating, transportation and household sector, Latvia spent around €700 million in 2022.

To address uncertainty about natural gas supply, the Ministry of Economics of Latvia and Latvenergo (a state-owned energy company) finalised an agreement with the LNG terminal, Klaipeda and non-EU gas importers. In addition, the Latvian government also considered cooperating with the Paldiski LNG terminal and building a new LNG terminal at Skulte or in Riga. However, in early 2023, due to regional overcapacities of LNG, the Skulte LNG construction was put on hold. Moreover, Latvia emphasised evaluating the national nuclear energy programme to fill the gap between the demand and supply of energy, advance the energy system and achieve energy independence. In addition, on 30 August 2022, all three Baltic states signed the Marienborg declaration to improve wind energy.


The ongoing Russia-Ukraine conflict has huge geopolitical and strategic implications for Lithuania. The former Prime Minister of Russia in June 2022 commented that ”if Ukraine fails, the Baltic states will be following (LRT 2022). And, as per exiled Russian business tycoon Mikhail Khodorkovsky, Russia will start with Lithuania. Such comments made some ground when a bill was introduced in the Russian Duma in June 2022 to remove recognition of Lithuanian independence.

Within a month, Lithuania faced a severe cyber attack targetting state-owned state owned energy companies. For Lithuania, like the other two Baltic states, the conflict resulted in a surprise increase in energy prices (a 190% increase in wholesale price), leading to inflation. In September 2022, inflation peaked (22%), and economic growth was measured at only 1.9%. To address the energy crisis and reduce energy prices, Lithuania aimed to advance the production of RES to 70% of the total domestic power consumption by 2030 and 100% by 2045. Also, the Lithuanian government adopted a package for temporary financial support measures to reduce the conflict’s social and economic impact. Moreover, on September 22, 2022, the Lithuanian government announced an energy subsidy that covered around 80% of the price increase. Similarly, the government announced compensation of 80% of the price increase in the gas and central heating sector. 

Following the Russia-Ukraine conflict, Lithuania gradually reduced its reliance on Russian energy imports by redirecting them through the LNG terminal in Klaipeda, the oil terminal in Butinge, the new gas interconnection with Poland, the enhanced interconnection with Latvia, and the existing electricity interconnections with Poland, Latvia, and Sweden. In addition, Lithuania also plays a significant transit role in the supply of natural gas to Kaliningrad Oblast. Amid this conflict, deliveries to Kaliningrad Oblast have not been halted but are being carried out at a reduced level. Due to a transit contract between Lithuania and Russia for ten years, natural gas supply did not cease functioning. 


The Russia-Ukraine war highlighted the need to expedite the Baltic states’ energy transition and pressured policymakers to make the necessary choices and trade-offs. The Baltic states’ long-term strategy for energy security, which is to diversify the energy supply, is a significant approach. However, due to high pricing and commercial and political pressures, Baltic states are maintaining their stand on the conflict. The war also allowed the Baltic states to pace energy diversification activities at policy and infrastructural levels, which may help them strengthen their energy security. Due to the ongoing conflict, all three Baltic states voiced their opinions against Russia, which shows that the conflict allowed them to facilitate cooperation. Amid this conflict, the increasing role of renewable energy resources seems to be a leading player in meeting energy demand in the Baltic states. The war gave the Baltic states confidence to survive without the Russian supply and with the temporary energy crisis. However, it seems it will help them achieve energy independence in a larger framework.

Pramod Kumar

Pramod Kumar is associated with the Center for Russian and Central Asian Studies (CRCAS), School of International Studies (SIS), Jawaharlal Nehru University, New Delhi, India. He studied at Vytautas Magnus University, Lithuania in 2018 with the support of prestigious ‘Erasmus+Learning Mobility’ fellowship.

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