Dark days at the centre of Europe

The Baltic state of Lithuania - sandwiched between Latvia and the Russian exclave Kalingrad - faces an economic contraction of 18 percent for 2009.

To that the government has said it will add a 30 percent increase in household power prices in 2010, as it fulfils a condition of EU membership and shuts Ignalina, the Chernobyl-style nuclear power plant that provides 70 percent of Lithuania's power.

EU officials in Brussels pressed for the closure at the start of the century, when the bloc was embarking on its eastern enlargement. Their goal was to lower the risk of a repeat of the Chernobyl nuclear explosion of 1986.

Neither recession nor energy security were factors when the sculpture was symbolically unveiled on May 1, 2004 as Lithuania, once occupied by the Soviet Union, joined the EU. It is described by the country's tourism website as marking "the poignant return of Lithuania to the family of European nations".

But from December 31 - when temperatures can drop to minus 30 degrees Celsius (minus 22 Fahrenheit) and rivers freeze - the closure will make Lithuania more dependent on an increasingly irregular supply of power from its former occupier.

"It's the worst crisis ever," said Jan Glushachenkov, a 44-year old former excavator driver who lives next to the sculpture above a compass mosaic.

Speaking to reporters in the still hush around the column near the village 26km northeast of Vilnius, Glushachenkov said he has already been out of work for almost a year.

He pointed out the more pressing risks Brussels now faces in closing the reactor with the country's 3.5 million people locked in recession: "People will have to emigrate or to go to steal."

Population losses due to net emigration since 1990 already amounted to about 10 percent, according to a 2008 report from the OECD.

Edgy relations

For those who stay, things will be tough. Glushachenkov's neighbour Ludwik Trypucki, an 86-year-old farmer, said the shutdown will lift his monthly power bill to about 18 percent of his 800 Lithuanian litas ($333.5) pension. He already pays 120 litas per month.

"I understand they had to close it if it was unsafe to operate, but they had to agree in advance to get cheaper electricity. Now it's unclear where that will come from," he said.

Lithuania plans to import electricity from Estonia, Russia and Ukraine, via neighbouring Belarus. A small amount will be imported via cable from Finland and Latvia.

The increasing energy dependence on Russia, which will also supply gas for a fossil fuel-powered electricity plant, comes as relations between the countries remain edgy.

Lithuania objected to Russia building a gas pipeline to Germany under the Baltic Sea and attempted to block the start of EU-Russia talks on a strategic partnership.

Some in the Baltic region fear a planned pipeline under the Baltic Sea from Russia to Germany, Nord Stream, could offer Moscow a direct energy lever with Europe, enabling it to cut off countries' gas to wield diplomatic pressure.

Russia has in the past been a reliable gas supplier to Lithuania, although it has cut oil supplies to a Lithuanian refiner, Mazeikiu Nafta, now owned by Polish oil group PKN Orlen.

Inflation

Prime Minister Andrius Kubilius is hopeful countries in the region will be happy to sell Lithuania electricity surpluses the downturn has created in their countries, and pointed to long-term power contracts Lithuania has signed.

"Lithuania will become more dependent on imports of energy resources after Ignalina's closure. That will reduce our energy security, but we feel assured about the next year," he told reporters.

The EU has allocated so far about 820m euros ($1.17bn) in aid to decommission the plant, deal with the nuclear waste and upgrade a fossil fuel plant, but the central bank points to the shutdown's broader impact.

"A 30 percent hike in electricity prices will slash gross domestic product by one percentage point and will increase inflation by almost one percentage point," said Raimondas Kuodis, the central bank's chief economist.

"It does not look a lot in the context of the global crisis, but for Lithuania's economy it's a painful hit."

Besides jobs lost at the reactor in the town of Visaginas in Lithuania's easternmost corner, businesses straining to maintain working capital will be squeezed.

Arturas Zaremba, head of major cement producer Akmenes Cementas, said his power prices would more than double to 15 Lithuanian cents per kilowatt-hour from six, raising costs for the company with revenues of 125 million litas by six or seven million litas.

"The electricity price increase will be a serious shock not only for our company, but for the whole economy," he said.

In Visaginas, unemployment at about nine percent - less than the national average of 11.7 percent - is forecast to reach about 11.5 percent in 2010.

"I have been working at the plant for 27 years, my whole life was connected to it," said Andrei Grigoriev, walking past a memorial stone from 1975 marking where the town was begun.

"Of course, it is painful to see it being shut, and that it was a politically motivated decision," he said.

Lithuania's opposition made a last unsuccessful attempt in December to force the government to restart negotiations with Brussels with a view to extending Ignalina's lifespan, a project supported by former Prime Minister Gediminas Kirkilas.

"The European Commission does not fully apprehend the situation of the Baltic states, and think that electricity imports from Russia is not a problem," he said. "They don't share the same historical experience."

Better opportunity in Africa

In an office hooked up by closed-circuit TV to a direct view of the gleaming, cavernous interior of the reactor hall, Viktor Shevaldin, Ignalina's veteran head, says he is resigned to the closure of the plant's remaining reactor at 11pm on New Year's Eve.

Full decommissioning at an estimated cost of 8.6bn litas will take about 25 years.

"We face a different future, but we have come to terms with it already," said the grey haired 60-year-old.

But let him talk more, and his tone changes. The chance of a major accident is one per one million years of reactor work, he said: "It's like being hit by a meteorite while walking on the street."

Back at Purnuskes, Algirdas Kauspedas, an architect who became a celebrity rock musician with a band he formed in the last days of the Soviet Union, is pragmatic.

"Market perspectives are bleak here. It's better to look for possibilities in Africa," he said.