Finland, Estonia Move to Reduce Reliance on Russian Gas – WSJ

Finland and Estonia have agreed to build two liquefied natural gas terminals connected through a pipeline in the Gulf of Finland, a move aimed at reducing both countries’ reliance on Russian natural gas.

Russia currently supplies all of Estonia and Finland’s natural gas imports. The two countries have been in talks over linking their gas markets for over three years, but Russia’s recently more aggressive foreign policy has amplified concerns, especially in the Baltics, that Moscow may use gas deliveries as a tool to reassert its influence over the region.

The new plan calls for the construction of a large-scale LNG terminal with a regional distribution in Finland, a smaller gas-distribution terminal in Estonia and a pipeline tying the countries’ gas markets together, the Finnish government said in a news release late on Monday. The project had been put on hold due to disagreements over the sizes of the terminals, with both countries wanting the bigger facility on their shores.

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Estonia’s Prime Minister Taavi Rõivas said having the deal on the table would allow Estonia the opportunity to decrease its dependency on Russian gas significantly. He told Finnish broadcaster YLE that relying on a single source of energy is a big problem, and if this “dependency is on Russia, then it is doubly problematic.”

In Estonia, critics said a small gas-distribution terminal wouldn’t serve the Baltic country’s interests.

“It is in the interests of Estonia to build a regional LNG terminal, not set up a small terminal that would make the gas more expensive for consumers and be pointless to our economic environment,” Marko Mihkelson, a member of the conservative opposition IRL party, wrote on his official Facebook account.

Gasum Oy, the Finnish gas company in charge of developing the project together with Estonia’s Võrguteenus, said the new agreement will help move the project forward but the final outcome still hinges on the availability of sufficient financial support.

The Finnish government said efforts are being made to secure substantial European Union funding for the projects. The total cost of the projects are estimated to be close to €500 million ($623 million) and the countries hope the EU will cover about 75% of the €200 million pipeline and a yet-to-be decided portion of the terminals’ cost, said Lauri Tierala, special adviser on EU Affairs for the Finnish government. Gasum said a final decision by the EU on the pipeline funding is expected this spring.

The Finnish government said that if the construction of the Finnish terminal hasn’t progressed enough by the end of 2016, it may be built in Estonia instead. The countries aim to have the gas pipeline in operation in 2019.

Finland’s Prime Minister Alexander Stubb said the deal would help improve the countries’ gas-based energy security.

—Juhana Rossi in Helsinki and Liis Kängsepp in Tallinn contributed to this article.

Write to Anna Molin at anna.molin@wsj.com

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