Mistakes regarding the LNG terminal were made in April, Sikkut has to handle the muddle made by others

The white ship never came to Estonia. The Finns have their own LNG terminal and the Estonians do not. Photo: Illustratsioon: Artur Kuus

• The stationing of the LNG terminal in Finland is not Riina Sikkut’s fault.
• If any mistakes were made, it happened in the spring.
• Taavi Aas and Taavi Veskimägi made false promises.

Minister of Economic Affairs Riina Sikkut (SDE) is being treated unfairly now. When we heard the news the day before yesterday that the LNG terminal would be located in Finland after all, rather than in Paldiski in Estonia, it was Sikkut who came under the sharpest criticism. Even if one can agree that she has made some mistakes, in the grand scheme of things it had already been decided by the time she took office.

Going back in time to spring, the Estonian public and companies operating in the gas market were given two signals. Firstly, that Estonia and Finland will jointly lease an LNG terminal. Secondly, for the heating period 2022-2023, the LNG terminal (a very large ship) will come to Estonia. The two institutions which conveyed this message were the Ministry of Economic Affairs and Communications (MKM) headed by the then minister Taavi Aas (KE) and Elering headed by Taavi Veskimäe.

As of now, both promises have proven false.

The Estonians quarreled among themselves

In the beginning of April, the press release of the Ministry of Economic Affairs announced that the Estonian and Finnish ministries had signed an agreement for jointly renting a terminal vessel or a floating storage and regasification unit (FSRU). In an interview on April 8, Veskimägi, the head of Elering, repeated the same idea: the terminal will be leased jointly, first the terminal will stay in Paldiski, and once the Finns are ready with theirs, the terminal will travel to the northern shore of the Gulf of Finland. The journey from Paldiski to Finland could take place in the third quarter of 2023, Veskimägi indicated at the time.

On April 28, the agreements were written down and signed for the first time. The economic ministers of Estonia and Finland signed a memorandum which assured again: the terminal will be leased jointly and the terminal will stay in the facility where the reception capacity is ready first. Although the memorandum did not directly state that the terminal would come to Estonia, everyone assured in public that it will be Estonia.

In fact, the first diplomatic failure had already occurred by that moment. There was a dispute in Estonia between Alexela, Elering and MKM about the terms of whether and how the piers and pipelines would be built in Paldiski. Whether, who and how the terminal will be leased. Among other things, there was also the idea (in some versions a promise) that Estonia would rent its own LNG terminal by itself and that the Finnish participation would not be needed.

In any case, Estonia gave an official signal to Finland that we were unwilling to lease an LNG terminal with them. Then Estonia's view changed and it became clear that we actually wanted to lease the FSRU together with the Finns. “An extremely embarrassing diplomatic situation, but the Finns obliged us and it was written in the memorandum that we shall lease the vessel together,” recalls Prime Minister Kaja Kallas (RE).

In retrospect, it is no longer possible to determine who was wrong and where. Alexela has its own version. Elering has another. In the end, it is not that important. These are enterprises with their own specific interests. The political will and the Estonian state were represented in this process by the minister of economic affairs and the ministry. If we are seeking for the culprit, we have to point the finger first at Taavi Aas' office.

Eventually, the Estonian-Finnish memorandum collapsed, and it happened only three weeks later. On May 20, the Finnish grid operator Gasgrid signed an agreement with the American company Excelerate Energy to lease the Exemplar LNG terminal for ten years. The price of the transaction is nearly 500 million euros. This agreement has only the signatures of the Americana and the Finns. There is no signature of Aas, Veskimägi or any other Estonian.

From that moment it could be said that the Finns had their own LNG terminal and the Estonians did not. Five months later, nothing has changed. The Finns have it and the Estonians do not. One can only speculate why the Finns went for it alone. Apparently, the decisive factor was that they had the money, the decision had been made, and they had been negotiating with the Americans for a long time, while conflicting signals were coming from Estonia and there was no clear political will. So the Finns simply did it.

Finland avoided answering Estonia

On July 18, Riina Sikkut became the new Minister of Economic Affairs. At least formally, at that moment there was still an agreement that the LNG terminal (the one leased by the Finns) would come to Estonia for the first winter. No one had changed what had been said in the spring. At least formally, it was still valid that once the mooring pier (built by Alexela) and the pipeline for receiving the gas (built by Elering) are completed in Paldiski, the LNG terminal will come to Estonia first. It is true that the memorandum between the ministries is not legally binding and it could rather be called a political agreement between gentlemen.

Sikkut said that she approached her Finnish colleagues already a week or two after taking office to have clarity about the fate of the LNG terminal. The spring agreement still existed, but in the meantime the reality had changed so much that at least Sikkut became suspicious: the Finns were actually no longer interested in moving the terminal to the Estonian quay. To repeat once more: the Finns had already leased the terminal. By the middle of the summer, it was also clear that the Finns can build quickly as well, and it seemed that instead of the end of 2023, the Finnish quay would be completed by the end of this year. The logic of why Estonia and Finland had to do something together was falling apart.

Two months of silence followed. Alexela and Elering were building in Paldiski. The Finns were building in Inkoo. The only thing which did not work was communication between the Estonian and Finnish politicians. The Finns simply did not pick up the phone or answer e-mails. “I approached the limits of diplomatic politeness in my intrusiveness,” says Sikkut.

It was no longer about the Estonian government hoping that the LNG terminal would still come to Paldiski, but that an official and clear signal was expected from Finland. To hear them declare that the FSRU would come to Finland instead. It was a worse option from Estonia's point of view, but at least there would be some clarity, and operators in the gas market (Eesti Gaas, Alexela, Olerex) could plan their activities accordingly.

A bad solution

During the past two weeks, diplomatic communication reached even higher spheres. Prime Minister Kallas talked about the LNG terminal with her Finnish colleague Sanna Marin. Marin said nothing. On October 4, Finnish President Sauli Niinistö visited Estonia. Estonian President Alar Karis talked to Niinistö about the gas terminal. Kallas talked to Niinistö about the gas terminal. Niinistö first answered that this is a matter for the Ministry of Economy. But it seems that the approach to the Finnish president helped in the end to make the Finnish diplomats and members of the government move, and the day before yesterday it was announced: the terminal will come to Finland.

The solution is bad and now there are attempts to rescue whatever possible. According to Sikkut, there is an agreement with Finland to develop a scheme so that Finnish and Estonian companies would have priority in using the Finnish LNG terminal. Elering and the Finnish Gasgrid have to come up with a legal solution. No one knows when it could be ready.

Considering that that it took Eesti Gaas five months from the beginning of the negotiations until the LNG tanker actually arrived in Klaipeda (the first tanker will arrive next week), it would probably be too late already for an Estonian company to deliver a tanker to the Finnish LNG terminal in January of 2023.