The coalition is unable to resolve the crisis fuel disputes

The State Construction Control Bureau (SCCB) has concluded a procurement “Provision of a safety reserve service for the establishment of state (Republic of Latvia) oil product reserves” and selected eight companies with which to conclude contracts for the storage of a total of 352,700 tons of diesel and gasoline in Latvia, Lithuania, and the Netherlands. The planned duration of the contracts is 2021, while the total estimated contract price is 14.6 million euros without VAT. © Ekrānšāviņš

The Latvian state, in the person of one small institution, has concluded annual agreements on the pre-emptive right to purchase fuel in the event of a crisis. Once again, a significant part of the fuel will be stored abroad, and once again the service providers include a company related to the Kremlin.

This is a serious problem because huge money is being spent, but the confidence that fuel will be available in the hour of crisis is virtually nonexistent. The Minister of Defense Artis Pabriks has repeatedly publicly criticized the State Construction Control Bureau (SCCB), upon which the process of organizing the procurement has been thrust upon. At the same time, at the government level, this problem has not been discussed and resolved with Prime Minister Krišjānis Kariņš and Minister of Economics Jānis Vitenbergs.

The procedure for maintaining fuel reserves needs to be radically changed and, first of all, it must be stated that what is really being bought is fuel, not 'tickets' or the pre-emptive right to buy theoretically available fuel. Secondly, it must be stated that 100% of this fuel is stored in the territory of Latvia. And, thirdly, the aim must be clarified as to what crises and in what amount this fuel should be stored. When it comes to an economy that would have to endure an energy crisis and keep public and operational transport running or replace gas, that is one story. If fuel had to be poured into tanks and other military vessels, the volumes would already be completely different. However, at present, all these issues that should be resolved at the government level are reduced to the almost anti-state activities of the SCCB, which no one, including Minister Pabriks, can influence.

Pabriks fights on social networks

Last autumn, the Ministry of Economics issued an informative report to the government on the change of the fuel safety reserve storage procedure. However, until the tender for this year's storage was over, the document was not put on the government's agenda. Undersecretary of State Edijs Šaicāns hopes that the Cabinet will finally consider it in January. The ministry's report considers three different options for changing the system, and the option it supports is as follows: the state physically buys fuel, but rents tanks for storage from merchants. There are enough storage tanks in Latvia.

Until the procedure is changed, SCCB organizes procurements in the old way. And, as Svetlana Mjakuškina, the director of the SCCB, admits in a conversation with Neatkarīgā, it is not entirely appropriate that the Minister of Defense attacks her bureau on Twitter and Facebook, when in fact this is a government-level issue. SCCB, if the Minister so requested, could explain the situation, but it is first and foremost necessary for the ministers themselves - Pabriks and Vitenbergs - to agree on a change in the existing procedure. Vitenbergs has been silent so far. Why? Because no one has asked for his opinion. In this manner, this approach has been going on for several years, but no practical changes have been made.

37% abroad this year

In accordance with the effective regulatory enactments, merchants may store abroad up to 75% of the fuel reserved by the State of Latvia.

This is enshrined in Cabinet Regulation No. 286 “Procedures for the Ensuring and Providing of Emergency Stock Services by Merchants for the Establishment of State Petroleum Product Stocks in a Specified Amount.”

The regulations were signed by the then Minister of Economics Artis Kampars and Prime Minister Valdis Dombrovskis. So the same Unity party (Vienotība) is responsible, which is still in power with a slightly adjusted name.

SCCB claims that this year it has concluded contracts for the entire amount available for storage in Latvia offered by merchants - this year it is 63% in Latvia, 37% abroad - in Lithuania and the Netherlands. Aviation fuel is stored 100% abroad.

In 2021, SCCB granted the right to enter into an agreement on the provision of state oil product safety reserves to eight companies: SIA Pirmas, SIA Circle K Latvia, SIA RDZ Energy, AS Ventbunkers, Vitol SA, Gunvor SA, UAB Okseta, and UAB Baltic Petrolium. And here it should be reminded once again that for 14.6 million euros the Latvian state does not buy 352,700 tons of diesel and gasoline, but only the pre-emptive right to purchase this fuel, which is supposedly stored somewhere physically. In fact, this is a deal only on paper about fuel that is also on paper. And that is what Minister of Defense Pabriks is rightly worried about.

A slice for an acquaintance of Putin

In the event of war, each country mobilizes the available reserves, and there is no reason to believe that the signed companies will be allowed or able to take even a liter of fuel out of the countries where their reservoirs are located to fulfill their commitment to Latvia's pre-emptive right to buy it. From the point of view of Latvia's defense interests, the current procedure for maintaining the crisis fuel reserve is useless. And, as mentioned in the statement of the Minister of Defense, not only because everything is only on paper:

"This procurement is questionable by the fact that the contract has also been signed again with the Swiss company Gunvor SA, which has been owned by Russian President Vladimir Putin's acquaintance Gennady Timchenko for many years. Petroleum products play a vital role not only in the functioning of the national economy but also in the provision of critical services and the maintenance of the national security and defense system capabilities. I therefore believe that contracting with companies that may be closely linked to the Kremlin is unacceptable."

Old directive, old regulations

It should be emphasized here that the European Union's Directive 2009/119/EC, which is at the heart of the idea of ​​maintaining reserve oil stocks in general, does not mention war as a possible cause for fuel shortages in the Member States. These are crises of an economic nature only, as "the supply of crude oil and petroleum products to the Community remains very important, particularly for the transport sector and the chemicals industry. The increasing concentration of production, dwindling oil reserves and growing worldwide consumption of petroleum products are all contributing to an increased risk of supply difficulties."

Examples of such difficulties and local crises include possible disruptions in the supply of natural gas, which may require the use of another fuel for energy production, such as crude oil or petroleum products.

It must be concluded that the relevant European Union directive is as morally obsolete as the regulations of our Cabinet of Ministers, which currently allow fuel to be stored only on paper and abroad.