The Ukraine-Crimea crisis has received worldwide coverage ever since Russia stepped up its rhetoric and the West countered with sanctions on certain Russian officials. However, the full repercussions of these economic deterrents are just beginning to produce shock waves across the European energy market. Lithuania, a country entirely dependent on Russia for its gas supply, is said to be paying the political price of this conflict.
Russia dominates the European energy market, with a 30% stake in the supply of natural gas to the continent. This fact has historically made European leaders uneasy, since Russia has sought to dominate exports of oil and natural gas in the region, while the West wants to loosen Moscow’s grip on this energy market – often used a political instrument by Russia.
These fears by the West have come to fruition as a result of the Ukrainian crisis and Russia’s decision to annex Crimea. The first country to bear the brunt of this political confrontation is Lithuania, which is entirely dependent on Russia for its natural gas supply.
The direct result of this conflict is costing Lithuanians around “30% more for natural gas than any other European nation”, as a result of them being shackled to a monopolistic supplier. Lithuania has since asked the US to increase its exports to Europe in a bid to solve their current natural gas crisis.
This poses a legitimate question to the upcoming LNG terminal in Malta:
Should there be some form of conflict in Azerbaijan that gains worldwide attention and results in the sanctioning of the Azeri government by the West, what would be the result on natural gas prices imported to Malta?
Malta has an 18 year contract with for the supply of natural gas with Azerbaijan’s state-owned oil and gas company SOCAR, which forms part of the ElectroGas consortium. This company has already been receiving negative press even before the construction of the new power station. It has been accused of “opacity in its dealings with private individuals, at the expense of Azeri citizens”.
It should also be noted that conflict in the Azeri region is ongoing ever since the separation of the Soviet Union. In 2008 there was the Georgia-Ossetian conflict, an ethno-political war involving Georgia and ethnic Russians in the autonomous South Ossetia region (very similar to what is happening in Crimea at the moment). Given the fact that Azerbaijan has a long standing dispute with neighbouring Armenia following the 1994 war in the autonomous region of Nagorno-Karabakh, a conflict in the region is not outside the realms of possibility.
It is undeniable that Malta has entered into an energy deal with a volatile country. In the same manner that Lithuania is paying the price for the Ukrainian crisis, there is no telling how energy prices in Malta could spike should a similar political crisis in Azerbaijan erupt.