It is a matter of fact that the Baltic States have largely ceased importing Russian gas supplies. Gazprom cut gas deliveries to Latvia in August. Lithuania is no longer importing Russian gas for domestic consumption (but gas continues to transit pipelines). Estonia stopped importing Russian gas in April.

The Baltic States’ strategy is built on three key pillars:

• increasing LNG imports via shared use of flexible floating storage regasification units at a regional level;
• enhanced interconnectivity between the Baltic States and Poland;
• shared use of gas storage facilities in Inčukalns, Latvia.

In a scenario of stormy energy prices, the Latvian economy is reportedly being protected by support measures aimed at helping households and businesses, even though in the third quarter some of them only involved promises and expectations. In accordance with the flash estimate reported by the Bank of Latvia, it dropped 1.7% in Q3 compared to Q2.

As of 2022, IEA reports that Central and Eastern Europe has four LNG terminals (in Croatia, Greece, Poland, and Lithuania) with a combined capacity of about 20 bcm a year, or 10% of the region’s gas consumption. Existing LNG terminals can provide market access for landlocked countries and for markets with no import terminals. This model is working in the Baltic States, with both Estonia and Latvia importing LNG via Lithuania’s Independence floating unit. In the Baltic region, an important gas storage capacity at Inčukalns in Latvia supplies Estonia and Lithuania in the winter. Riga has further modernized the facility to allow for more flexible gas use.

As of now, Latvian manufacturing has been supported by stable export demand and materials stocked in a timely manner. However, the IMF’s outlook on global economic growth has weakened. This suggests a difficult path for manufacturing and exports of goods. Furthermore, the rise in relative costs might make the path rockier, thus weakening competitiveness.

The availability of support measures should not alleviate concerns about investment in energy efficiency and energy independence. In mid-September, natural gas storage levels in the EU were almost 84% full, meeting the new EU-wide target of 80% by 1^st November ahead of time. However, IEA analysis suggests that EU gas storage facilities would need to be 90-95% full to survive a complete interruption of Russian gas flows from the start of the European heating season. Even in this case of high storage levels, gas supply curtailments would remain a significant risk in the second half of the winter. The news reported by the Bank of Latvia suggests that the amount of such investment could be quite significant in the coming years. And looking at the gap between storage demand against the current capacity, we gladly say “hopefully”.