Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 0:06

Hello listeners, and welcome to the Monto weekly podcast, bringing you energy matters in an informal setting in today's pod, we discuss the potential vulnerability of Europe's energy infrastructure, especially offshore pipelines and electricity interconnections. Concerns were raised following an incident. at the Baltic Connector linking Finland with Estonia. While supply of gas to both countries is unlikely to be impacted given the availability of LNG shipments, at least in the short to medium term, the incident has potentially exposed both countries to winter shortages. And in addition, it poses questions of the security of the wider subsea infrastructure in the Baltic, but also in the North Sea. How at risk are there physical or cyber attacks? Joining me, Richard Sverresen, is Jakob Kosimirskyi of the Norwegian Institute of International Affairs. A warm welcome to you, Jakob. Hello. Um, just when we thought we could perhaps begin to relax ahead of the winter, the Baltic Connector incident in the Baltic Sea has made many people nervous. Should they be worried, Jakob?

Jakub Godzimirski, Norwegian Institute of International Affairs: 1:16

Uh, we should wait until, uh, it is, uh, come, uh, the investigation is completed and some, uh, The conclusions could be drawn, uh, we don't know exactly what happened, we know that some elements of critical infrastructures, infrastructure were damaged, we don't know who was behind, and we don't know what the long term impact of this is going to be, but we know that this raises a number of Thank you. Issues, uh, more broadly, the issue of the exposure of, uh, various elements of critical infrastructure to Uh, man made operations that could inflict some, uh, physical but also digital, uh, damage, uh, to uh, objects and, uh, structures is definitely back, uh, on the agenda and this is not, uh, uh, a coincidence because we need to remember that only, um, 13 months ago, something happened in the other part of the Baltic Sea where, uh, where the two, where the two, uh, uh, Nord Stream pipelines were, uh, uh, uh, damaged and, uh, and, uh, this, uh, has made, uh, many worry about, uh, the fate of, uh, critical infrastructure in this time of, uh, growing, uh, tensions between Russia and the collective West. And we know that, um, Russia, uh, used to be one of the key, uh, suppliers of energy to Europe, so Russia could have some incentives to, uh, change the, the balance of energy power also by conducting this type of operations. And we know also that, uh, when we think about this type of, uh, issues, we need to think about, uh, uh, in whose interest something could be done, but also, What kind of, um, purely technical capabilities, uh, those who could be interested in inflicting damage can have. And we know that Russia has maybe both the interest and the intention, but also the technical capacity, possibility to inflict this type of damage. So this, this is a part of the broader discussion about the security situation in the Europe in the aftermath of this one in Ukraine.

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 3:32

Absolutely. And, um, I know you said, you know, it's early days. Um, it's probably too, too early to apportion blame or, or point the finger anywhere. But I mean, could, is it likely that such an incident could have been the result of, for example, a ship's anchor as, as equally as, as a sabotage?

Jakub Godzimirski, Norwegian Institute of International Affairs: 3:49

I have been following this discussion and the... There, there have been two, uh, mentions of two different, uh, ships that could be somehow involved in, uh, the causing this, uh, trouble. We know that, uh, that there have been some accusation, accusation raised against one, uh, the suspicion raised against one of the Russian that was, uh, the observed in the, the vicinity of the place where this damage occurred. But there is also. Some information about another, this time, Chinese ship that could also be involved. But, um, it's very difficult to somehow point what could be the reason for this damage to be done, because as far as... As I understand, uh, this pipeline, the place where the damage was done is like 60 meters below the sea surface. Then it's not possible that, for instance, some poor manoeuvring of a ship could have damaged this infrastructure. But until we don't know, since we don't know what has really happened, then it's really too early to draw any conclusions. Yeah. Do you know when we

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 5:12

could find out at the earliest? I mean, we still, we're still waiting for answers in terms of the North Stream pipeline explosions. So, we could be waiting for

Jakub Godzimirski, Norwegian Institute of International Affairs: 5:21

quite a while. I think that what is important here to understand is that the... It's not necessarily the result of the investigation that is going to be important. We know that something that is difficult to explain has happened. This something has had some impact on the availability of uh, energy in two countries. And, uh, having in mind that, uh, similar, um, uh, accidents or, uh, things happened before, then it raises a number of questions and makes the people, uh, uh, worry about, uh, for instance, the coming, uh, winter. It's, uh, uh, it has had a direct impact on two countries that, uh, more or less are able to cover the immediate energy needs from, um, Other sources, but this is also a part of this broader picture discussion about the need to protect the critical infrastructure not only in the Baltic Sea, but also in other places where this Critical infrastructure plays, even the, the maximum crucial world in securing energy supply, uh, to consumers in Europe, but also in other parts of the world. So, I mean,

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 6:35

if, if, you know, if I were a, a Norwegian pipeline operator or, or a gas firm, should I be worried about this incident in the Baltic? I mean, if it can happen there, could it not happen in the North Sea? You know, and far more important, I mean, not to denigrate the, the, the border connector in any way, but, you know, the, the amount of flows that go from Norway to the continental Europe and to the UK, vastly, vastly more, more in terms of size and volume than, than what is flowing in the border connector. So, you know, is this raising, you know, serious concerns about other parts of the energy infrastructure and other parts of, of, of,

Jakub Godzimirski, Norwegian Institute of International Affairs: 7:12

of Europe? It definitely does and, uh, there are several good reasons why it does and why it should make people, uh, worry or at least make, should make people take some, uh, precautions. The first issue is the question of the exposure of, uh, those who need, uh, this energy to this, uh, possible, uh, damage. The other, uh, question is that, uh, uh, it's, uh, relatively easy to monitor a small, uh, pipeline connecting to, uh, relatively peripheral countries in Europe while, uh, You face a much bigger challenge if you are to monitor, uh, 8, 000 kilometers of the Norwegian, uh, pipeline system, connecting, uh, the production, the fields with the customers in the Europe. And then there is also. Another dimension here because, uh, we think, uh, about infrastructure as something that, uh, is made up of, uh, several types of physical objects. But we also know that, uh, the supply of gas and other, uh, resources could also be the influenced by the conducting an operation in a digital space because we know that in order to manage this whole flow of, uh, Let's say, Norwegian gas from those several tens of production fields to Europe. needs to be managed somehow, and this management is not, uh, being done manually, but, uh, digitally. So if you get access to, uh, the digital systems that, um, uh, help, uh, Gasco, which is the Norwegian company that is, uh, uh, uh, responsible for management of those, uh, gas flows to Europe. If you are able to get access to their, uh, uh, cyber systems, then you can, in fact, even, uh, Bigger, uh, uh, damage to the supply of, uh, gas from the way to Europe, then by blowing up, uh, the one, uh, to the pipes. So, so this is also an important dimension here to have in mind.

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 9:24

So it, it's, it's, it's virtual as well as phy physical, the, the

Jakub Godzimirski, Norwegian Institute of International Affairs: 9:27

threat here of, of course, I can mention for instance, that, um, in, uh, on the 1st of January, 2018, Norway introduced a new law on security and, uh, There were three main reasons why this law was, this new law was introduced. One was that, uh, there had been some, uh, important changes in the strategic environment of Norway. Russian intervention in Ukraine in 2014 was the best. example of those changes. Then there was something that was called digital technological change, because over the past decades, more and more elements of critical infrastructure have also been digitalized, meaning that they are more exposed not only to physical attacks, but also to the operations in the cyberspace. And then the third reason why This new law was introduced was that, uh, that there was the kind of realization that Norway needs a system where you can have a kind of, um, uh, complete overlook of the situation and make, uh, those institutions that are responsible for securing access to various types of, uh, uh, functions and services, uh, work much more closer together because the Norwegian system as far as As it is concerned, even today, it is very much departmentalized, meaning that the Ministry of Transport is responsible for those elements of critical infrastructure that have to do with transport, Ministry of Energy is responsible for oil and gas, but also for transportation. and so on and so on. So you need to have a kind of better understanding of the, uh, complete, uh, and more complex picture of the situation. So, and this, uh, this is also something that is very much applied to, uh, in, in, uh, uh, discussing the Norwegian debate on, uh, the issue of, uh, protection of energy. Infrastructure, which is important not only for Norway, but also for the, the several hundred millions of European consumers. Of course, because if,

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 11:35

if there were to be damage either, you know, physically or, or virtually to the Norwegian gas infrastructure and the flows that would impact the flows to Europe, you know, it would have a huge impact, especially now ahead of

Jakub Godzimirski, Norwegian Institute of International Affairs: 11:47

the winter. Of course. And this is well understood, not only... Norway, but also in those receiving countries. And we also see that two of the most important European international organizations that are more or less interested in various aspects of security but also economic activity, the European Union and NATO, have established a much closer cooperation, uh, in order to be better prepared to address those, uh, uh, possible challenges related to the various aspects of critical infrastructure. Some months ago, a special group was established where NATO and the EU are going to work together. And on top of that, right after the blowing up of Nord Stream, there was also Uh, very much attention being paid to this at the bilateral level, Norwegian and German authorities, uh, uh, uh, started a conversation and then some measures were implemented where, uh, Norwegian actors, uh, together with German actors were trying to somehow identify and monitor situation, uh, with. A lot of those, um, gas pipelines connecting the way with Germany

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 13:05

in this case. So, so what is the best way then to protect this infrastructure, these pipeline, these, these interconnectors, is it? Is it through military surveillance? What is it? Is it drones? Is it, is it a combination of everything? But I think from what you're saying here, uh, Jakub, the, the, the most crucially is that people work together as a region rather than individual countries. It

Jakub Godzimirski, Norwegian Institute of International Affairs: 13:26

is, because when we look, for instance, at the Norwegian... Royal and the gas production. Most of this goes to other customers on the between five and six percent of gas produced in Norway is consumed locally, meaning in Norway. So 94 percent of this gas, which is the European, mostly European consumers and the. It somehow, uh, makes them also very much interested in, uh, securing access and, uh, smooth working of this, uh, uh, critical infrastructure. So, definitely, international cooperation is a part of the, uh, solution, but, uh, you need also to, uh, uh, have a balance between what you, uh, do in order to protect this critical infrastructure versus what it is going to cost because if the cost is very high then there is maybe no point in investing this type of money in to protection of critical infrastructure. So this balance between The need to protect, but also the need to secure a kind of economic viability of this whole project is also important. And then, um, the threats can come from various directions. I mentioned the digital space, I mentioned the physical possible damage being done to some elements of the critical infrastructure. An issue that is also, uh, very much, uh, discussed in Norway is this issue of, for instance, uh, the so called insiders. You can have people working in your organization who could, uh, be interested, uh, or, uh, either personally interested or forced by some external actors to provide them with some sensitive information, uh, about operations of the system, about, uh, the various types of security precautions being, uh, taken that would make it easier to extend a lax or to get access. And I know, for instance, that the Gasco digital system was, in fact, exposed to some digital attacks during the summer, and they have also realized that they need to implement some additional measures. And Gasco was also last year defined as an element of critical infrastructure in Norway, and they have to go through a very, uh, time consuming and, uh, difficult process of, uh, making people get access to, uh, confidential information, which was not, uh, the requirement before. So this is also, poses a number of challenges to those, um, The institutions and organizations that are defined as an element of critical infrastructure.

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 16:13

So it's, it's kind of, yeah, if I've understood you correctly, it's, it, it's raising the stakes in terms of industrial

Jakub Godzimirski, Norwegian Institute of International Affairs: 16:19

espionage. It definitely does. The Norwegian organizations responsible for the security of the country, PST, which is a kind of Norwegian Counterintelligence Service and the NMI, Norwegian Military Intelligence Service, together with the Norwegian National Security Authority, they published official Uh, and publicly a, uh, threat assessments on annual basis and this issue of, uh, uh, industrial espionage, uh, conducted by two countries that are identified by name Russia and China has been, they mentioned many times over the past, uh, uh, five or six years. So this is definitely something that, um, the authorities in Norway, but also in other countries. Very much anxious about.

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 17:10

Um, we've talked mainly about gas infrastructure, gas pipelines in terms of North Stream and also the B Baltic connector. Well, how about the power infrastructure, the power cables, the offshore wind turbines? Are these also, uh,

Jakub Godzimirski, Norwegian Institute of International Affairs: 17:26

vulnerable? Definitely. And it's also the, in a country like Norway, where. More than 50 percent of energy mix is, uh, made up of, uh, hydropower coming from various elements of, uh, infrastructure in Norway. This issue of, uh, Protection of power grid is definitely very high on the agenda because this is what makes the country, uh, run in a way because without power and when you look at the Norwegian debate about the critical infrastructure, there are two elements of critical infrastructure that are defined as the most important ones in the Norwegian context. The one is namely The power grid and the power supply and the other one is electronic communication. And those two are also very strongly interconnected because without power there is no electronic communication in a way, unless you have some alternative sources of energy easily available. So power grid is definitely something that is important. And Norway and, uh, in the most specific terms, but also Europe has also been, uh, building a lot of, uh, power interconnectors. The, in order to make the, the power market in Europe, uh, more, uh, flexible. So those are also those elements of critical infrastructure that could also be. Exposed because, uh, when you, uh, infl some damage on some interconnectors, then you, uh, make the system less able to deliver. And then in terms of interconnectors, there is also not only, uh, the infrastructure related, but was a political dimension to this debate because, Over the past couple of, uh, years, especially 2000, uh, 22 or early 2023 Norway experience, very high, uh, uh, electricity prices. And, uh, this was, uh, by some, uh, also, uh, linked to the fact that Norway has managed to build some, uh, power interconnectors without the, the power markets. The electricity markets in Europe went. This has supposedly made Norway more much by much more exposed to shifts in the pricing of energy on the European continent. So, uh, and this has already become an important element of the critical infrastructure in Norway, but also, uh, hopefully debated in the purely political and, uh, uh, with economic terms. So this really shows how important those issues are because they secure. the smooth flow of energy or various types of energy, the gas in terms of LNG and piped gas, but our grids in terms of making this electricity available to customers. And we know that there are some examples of those power markets functioning very, very well. This No, their experience, uh, that was based on the, the cooperation among the Nordic countries in, uh, development and, uh, the functioning of the power market is and

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 20:44

absolutely, I mean, who, who benefits from the vulnerability here and, and, and, and the, the jitters of the, of, of the market here in terms of. The infrastructure, Jakub, is it, you named, mentioned Russia and China, um, could, you know, shipped LNG also benefit from the, the, you know, potential threats to, to pipes and to, to cables?

Jakub Godzimirski, Norwegian Institute of International Affairs: 21:07

There are many factors that somehow, uh, Uh, impact, uh, the market, uh, developments in terms of energy and, uh, we have, uh, elements that are more directly connected to the critical infrastructure, but then there is also this whole, uh, political and geopolitical, uh, dimension, and, uh, uh, interestingly enough, uh, one can say that, uh, one of the countries that, uh, may benefit the most from those, um, Uncertainties and predictabilities, uh, caused by both, uh, the market dimension, but also by some, uh, political dimension is Norway because Norway has, uh, uh, uh, lot of extra ordinary, uh, revenue was generated the somehow, uh, very much benefit from those market developments. But this also, uh, shows how. It is difficult to make any predictions on the market because, uh, during the COVID period, there was this understanding that, uh, energy has become one of the key victims of the pandemic because the demand for energy was much lower than The prices went down, then the pandemic ended, and there was this optimistic view of the future of energy. But there was also an expectation that the market would be much more balanced. Then Russia decided to launch this war against Ukraine in February. This has also had huge... the implications for the energy markets because we had a situation when the most important exporter of energy Russia was involved in the war with a country that got also a lot of support from the most important customers of Russia. So this needs also to be understood that the market is interested not only by The economy by markets related, uh, the developments also by those geopolitical issues.

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 23:16

Absolutely. And a final question here for you, Jakob, and I think while I have you here, it'd be, uh, it'd be an opportune moment to ask you about the geopolitical crisis that we now see unfolding in the Middle East conflict, sadly. Um, You know, I know it's having a devastating effect on on the populations and inhabitants of the region. Um, but what kind of, are you concerned that it could have very big implications for, for, for, for energy, for especially for, for, for oil and

Jakub Godzimirski, Norwegian Institute of International Affairs: 23:47

gas? Definitely, we have to do with the conflict that is in the middle of the Middle East, which is still... An important area for production and, uh, the export of, uh, energy commodities. Uh, and we know that there are growing tensions, uh, in the region, uh, uh, and, uh, this most probably is going to have some, uh, huge implications for energy markets, but it's also very much, uh, it is going to very much depend on, um, how quick this, uh, most tense phase of the transit is going to be. Uh, dealt with. So what kind of measures those countries that are directly and indirectly involved in this conflict are going to take in order to calm the situation at the market as well? Yeah, it's very

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 24:41

worrying times, I think, both the incidents in the Baltic as well as in the Middle East. But sadly, we can't leave on an optimistic note, but Jakub, thank you very much for joining the

Jakub Godzimirski, Norwegian Institute of International Affairs: 24:54

Montel Weekly Podcast. Thank you very much. Looking very much forward to next conversation. Bye bye.