A lot at stake for Estonia as it shifts away from oil shale

An oil company from the Ida-Virumaa city in Estonia. Photo:

This industrial corner on the dividing line between the European Union and the Russian Federation has not received this level of attention for a very long time. Until Vladimir Putin’s gesture toward his “compatriots” in Donbas revealed Narva’s geopolitical significance, Tallinn’s politicians and residents had tended to stay away. Narva was seen as a place apart, the “Russia city” in the European Union closer to St. Petersburg than to the Estonian capital. 

 But now, on top of the war launched by their colossal neighbour, something else was driving politicians here. This is oil shale – Estonia’s “burning rock.” The region had quietly mined the kerogen-filled mineral for over a century. Under mounting pressure to line up with the EU’s green agenda, however, the government had pledged to abandon the resource. Oil shale had made Estonia a top polluter in Europe but also provided jobs to this fragile Russian-speaking enclave and lit and heated the country’s homes. Could Estonia afford such a change? “Every time you go somewhere, people ask how Ida-Virumaa (the Narva region) is doing, how people in Ida-Virumaa feel,” Kallas said. She was swept to power in January 2021 after a corruption scandal caused the previous coalition government of centrists and far-right populists to collapse. “There is anxiety, there is tension (in the air).”

Burning rock 

A mere two-and-a-half hour train ride from Tallinn, the Narva county which Kallas visited is nothing like western Estonia’s picturesque villages and e-everything. Ida Virumaa has the highest unemployment rate in the country. Half-empty housing blocks, ageing power plants and black smoke billowing over the sea still speak of the Soviet regime’s exploitation of the region. A myriad of artificial “ash hills” rise up from the otherwise flat, barren landscape. But it is here, with the “burning rock” oil shale burned into power or processed into oil, that the region has fuelled Estonia’s post-Soviet tech boom and high standard of living.

Shale oil is a rather ubiquitous liquid obtained by fracking miles underground. Oil shale, on the other hand, is a sedimentary rock found close to the earth’s surface, from the Narva region all the way to St Petersburg. Since finding out that oil shale could replace coal in running its locomotives in the 1920s Estonia has become world master in its processing the “burning rock.” Oil shale gave Estonia a unique status. It fuelled the Nazi war machine. It also provided Leningrad with domestic gas and powered the entire Soviet empire with gigantic power plants (still the world’s largest), which Moscow built near Narva. This brought citizens from all over the USSR to run the oil shale industry, thus forever changing the ethnic face of the region. 

The oil shale business transformed the region in other ways. It reworked the terrain. Its forests transformed into a lunar landscape, with artificial mountains of processing debris. The rivers and air became clogged with emissions. In Sillamäe on the coast, where the Soviets ran a closed-off plant to extract uranium from the shale there to manufacture nuclear weapons, they left a town swimming in radioactive material. 

 After joining the European Union in 2004, Estonia took giant steps toward diversifying its energy mix. It made the shale oil industry more efficient and less polluting, but giving it up was not then seriously considered an option. With an average of 18 million tonnes mined annually, the ”burning rock” gave the country enough to power itself and export a great deal to its Baltic neighbours and Finland. This gave the country a degree of energy security unique among ex-Soviet republics. In this economically embattled Russian-speaking border region, where suspicion toward the former occupier remained, oil shale was also a pillar of social cohesion. “We are one of the most energy-independent countries in the EU, and we will not compromise our energy security,” Juhan Parts, a former minister of economy, said some time ago. “We have a large neighbour.”

Under increased pressure 

Amidst rising concerns over climate change and the increasingly demanding EU’s “Green Deal” climate goals, incoming Prime Minister Kallas, breaking from the previous government, pledged to stop using public money to support the fossil fuel industry. By 2035, she said in January 2021, Estonia would no longer burn shale for electricity. The mining of oil shale would end altogether by 2040. “Estonia is number one in the world in the usage of oil shale for electricity generation which of course also makes it number one in Europe when it comes to per-capita CO2,” says Tomas Jermalavičius, head of research at the International Centre for Defence and Security (ICDS) a think-tank in Tallinn. Although it’s been traditionally linked to national security, “In light of the government policy of seeking 100 per cent renewables and full decarbonisation, it is obvious that this industry’s future is very bleak,” says Jermalavičius.

Annela Anger-Kraavi, the Estonian director of the Climate Change Policy Group at Cambridge University, says that the oil shale phase-out could be the biggest blow the region has experienced since the cataclysmic collapse of the Soviet Union. Steering away from fossil fuel is painful for many of Europe’s carbon-intensive regions, from Silesia to North Macedonia. But in Ida-Virumaa, with its Russian-speaking majority, and in the absence of any labour-intensive alternative so far, the transition poses a dilemma. “If those people are not taken care of, they might start to look across the border. That makes it even more important to make them feel that Estonia is their home,” she says.

From the castle on the banks of the Narva River, one can see the Russian flag waving from Ivangorod, a medieval fortress across the river and only 84 miles from St. Petersburg. This great Russian city is situated closer to Narva than Tallinn.

“The two castles are one view of society meeting another view of society,” says Narva native Allan Kaldoja. Three years ago, Kaldoja set up a theatre in the former Baltijets military complex, a dilapidated structure where, among other things, the Soviets had manufactured equipment to extract uranium from the oil shale in nearby Sillamäe. “If the place is left empty, the other side will come here.”

After pushing the Nazis out on May 9th 1944 and sending Estonians away – many to their death in Siberian camps — the Soviets built up the region as a key industrial hub fuelled by the oil shale and textile industries. The world of most Narva residents collapsed in 1991 when, overnight, Russian speakers were no longer proud players in an industrial empire, but rather the dreaded “former occupiers.” 

The Krenholm textile empire, once the world’s largest cotton mill, eventually closed, leaving more than 10,000 people without jobs. Narva was plunged into poverty and drug addiction. Ida-Virumaa turned into “Estonia’s Siberia,” largely resented and neglected by politicians and Estonia as a whole. Roughly speaking, a quarter of Estonia’s 1.3 million inhabitants are Russian speakers, and most live here.

Mistrust has long simmered in and around Narva that as occasionally resulted in serious unrest. In 2007, for instance, long before Vladimir Putin set out to defend “compatriots” in Donbas, the Russian president described the removal of a Soviet war memorial away from the centre of Tallinn as “blasphemy” and a “vengeful policy toward Russians living in Estonia and towards Russia”. The move set off riots among ethnic Russians, which took Estonia to the brink of civil war. At the same time, Estonia faced a major cyber-attack believed to have been orchestrated by Russia – the first the world had ever seen. 

The illegal annexation of Crimea and the war in Donbas in 2014 took theatre manager Allan Kaldoja to the day Estonia restored its independence when, as an 11-year-old alone at home in the coastal town of Narva-Jõesuu, he saw tanks roaming around. “For the first time, the fear came back,” Kaldoja recalls. “Politicians started saying, ‘oh, we have Narva!’” Journalists from around the world flooded into Narva asking, ‘will Narva be next?’ The attention and money that followed helped Kaldoja fulfil his dream of bringing more culture here, to bring Estonian and Russian speakers closer. In addition to his Vaba Lava Theater, Estonian Public Broadcast, with its TV and radio studios, has moved into the old military plant. “Before that, it was easy to forget about Narva.”

The lifeblood of Ida-Virumaa

 An estimated 6,000 jobs in the Narva region are directly linked to processing its “black gold”. Tallinn officials say the transition away from it will be gradual. To help reorient the economy, a process officials say started long ago, the region is getting 340 million euros from the EU’s “Just Transition Fund.” Ivan Sergejev, a Narva native who manages the Fund at the finance ministry, says that the biggest challenge is “how to do it in a way that is fair, how to explain it to the community – mostly Russian speakers – who will suffer the greatest impact.” Discussions with local groups are underway.

But many believe that this is too little and too late. Apart from oil shale, the region has little in terms of heavy industry. To be sure, the attention born out of the shock of Russia’s annexation of Crimea Narva played a role in helping it overcome its image as a drug-riddled place. It also helped Narva entrepreneur Vadim Orlov’s effort to boost the city’s reputation as a unique border location offering Russian and European companies “clear legislation, no bureaucracy, no under-the-table money and a really comfortable working environment where you are in the EU but can still communicate in your own languages,” says Orlov. Orlov, whose father worked as a driver for one of the oil shale power plants in Soviet times, grew up across the Narva River, in Ivangorod. In 2012, he converted a vacant space Moscow had once set aside for yet another oil shale power plant it never built into the Narva Industrial Park. Seven companies and 700 jobs have moved into his Park in the last years. But the current war in Ukraine has slowed investments. “Unfortunately, investment and troops go in opposite directions,” Orlov says. He fears the loss of oil shale jobs. “If people have no workplace, we do not know what they think, where they turn their heads, to the East or West.”

 From his office at Eesti Energia, Estonia’s state-owned – and largest – electricity producer, Andres Vainola overlooks a gigantic maze of structures: blackening Soviet-era red-bricked units standing side by side with shimmering glass buildings. It is here in Auvere, about three miles from the Russian border that, after being transported from nearby mines in big conveyor belts, Estonia’s “black gold” is crushed before being burned for power or processed into oil. While the electricity stays in Estonia, the oil is mostly sold abroad to be refined into gasoline.

The juxtaposition of the old and new plants tells the story of the company’s transformation and, in the words of its officials, its contribution to a climate-friendlier future. There is a roughly six-year-old power plant worth 610 million euros mixing shale with wood chips to make electricity. At the same time, a refinery reuses the steam left over when making oil to produce electricity. An oil shale plant under construction is meant, down the road, to evolve into a chemical plant that will use only old tyres and shredded plastic, and no longer oil shale, to make products for the chemical industry.

“We are trying to carry out a green revolution, and we agreed on a roadmap to zero emissions,” says Vainola, the CEO of Enefit Power, a subsidiary of Eesti Energia. He says that since 2017 oil shale mining has been cut in half, to six million tonnes annually, and CO2 levels accordingly. The oil shale workforce is also half of what it once was. Rising carbon emission quota prices imposed on polluting industries have contributed to Eesti Energia’s shift away from making electricity, which is particularly carbon-intensive, to making more oil.

“Do you know one country in Europe – in Germany, or Poland or in the eastern part of Europe where, in one region, half the employees have been laid off during the last three years?” Vainola asks rhetorically. “We did it and we are still alive.” Eesti Energia, company officials say, has reforested abandoned surface mines, and turned open-pit mines into sports fields, wind farms, and artificial lakes for water sports. 

“We can reduce our emissions to zero, but for the world, it is but a drop in the ocean,” Vainola argues. Estonia has “no heavy industry, no aluminium, paper or huge car industry. In that sense, our consumption of energy is a very minor one. Hence, our security of supply is even more important.”

Painful divisions

This past winter, when exceptionally cold temperatures caused energy prices to soar and wreak havoc on Northern Europe’s energy market, Vainola grew emotional when talking about energy security. It was weeks before Vladimir Putin invaded Ukraine and his troops were massing on the Ukrainian border. “You have to understand,” Vainola said. “My brother was born in Siberia, in prison. My grandmother was deported to Siberia. This is why we don’t trust the Russians and the big nations and try to be as independent as possible, energetically and mentally.”

Yet, sooner or later, be it as a result of a political decision or natural change, the story of Estonia’s love affair with oil shale will have to come to an end. Oil shale reserves are not limitless. Jaanus Uiga, director of energy at Estonia’s ministry of economic affairs and communications, says “the transition to climate neutral energy production in Estonia is inevitable.” Unusually cold temperatures and the war in Ukraine have forced adjustments necessary “to ensure the security of supply, and this means that it is reasonable to keep the existing capacities in working condition in case they are needed and there is an economic case for using them,” Uiga says. But this is “short-term rather than long-term.”

If anything, the war in Ukraine has sped up Estonia’s efforts to boost its renewable sector, and partner with Latvia on a big offshore wind farm off the Gulf of Riga. This has subsequently given a boost to discussions on building small nuclear modules. Estonia’s resolve, along with that of Latvia and Lithuania, to invest in grid infrastructure and disconnect from the Russian grid is stronger than ever. “Estonia will certainly not go back on its climate commitment, and Estonia will certainly not rely on Russian energy,” says energy security expert Tomas Jermalavičius at the ICDS.

 Nevertheless, the war has once again shown just how differently Ida Virumaa’s Russian speakers tend to think – especially with regards to war in Ukraine or sanctions imposed on Russia, analysts says. While 30,000 Estonians swarmed Tallinn’s main square for a pro-Ukraine rally in late February, the majority of Narva residents stayed home. While a few Ukrainian flags fly throughout the city, and despite Estonia’s ban on Russian media channels here, Russian propaganda continues to spread across the Narva bridge, across the airwaves and the internet. Among the Russian speakers, some 80,000 are Russian citizens. Simultaneously, 70,000 have “grey passports” – meaning they are officially stateless. This has been an emotional and controversial issue for years. Russia, some feel, is using the grey passport issue as a tool to sow divisions between Estonia’s Russian and Estonian speakers.

There is a fear that not only Moscow but also the far-right Conservative People’s Party of Estonia (EKRE) could enflame the “Russian vote”. “They are raising their voices saying we should walk out of the EU emission trading system, should maintain our oil shale industry and our reliance on oil shale power generation, otherwise those poor folks in Ida-Virumaa will suffer,” says Jermalavičius. “They naturally try to hurt the image of the EU because the party is anti-EU.” 

A wake-up call

In Kiviõli, home to one of Estonia’s first oil shale refineries, Kallas and her cabinet stopped to talk to local players about the region’s economic transition. Basking in the sun at the terrace of a café they faced a white-capped mountain where people had been skiing earlier that week. The hill is made up of six million tonnes of semi-coke left over from turning shale into oil. Years ago, locals helped transform it into a ski and motocross resort. The Kiviõli Adventure Centre has brought tourists and interest to this polluted corner of Estonia. “Nobody believed that it was going to work,” remembers resident Kaja Kreisman, one of the key players in the effort, which has made Kiviõli one of Estonia’s hippest holiday places. “Back then, we were the outland, Ida-Virumaa was an afterthought for Estonia – nobody cared what went on.” 

Like many, Kreisman would like to see an end to the industry that has maimed her family’s soil and soul, but she is sceptical. A new mine is about to open near her and she feels that oil shale executives are scrambling to mine as much as they can before it is too late. Workers at the Kiviõli oil shale plant do not speak Estonian. If the refinery closes, where will they go?

Meanwhile, Kreisman’s daughter Käbi, an engineering student in Tartu, comes home every weekend to help out with the Adventure Centre. The hotel the family bought to welcome tourists now houses some of the 100 Ukrainian refugees Kiviõli has taken in so far. For her, Ida-Virumaa is “the sea, the ash hills, the swamps, the quarries.” “The oil shale area has done its part in making this area what it is.”

It remains to be seen whether these visits by Estonia’s top politicians have come in just enough time for Ida-Virumaa. “The current war needs to be a wake-up call,” says Annela Anger-Kraavi of Cambridge University. Her Carbon Intensive Regions in Transition (CINTRAN) research project is underway in Ida-Virumaa to try to find out how oil shale workers – the miners themselves, not only the union and NGO representatives – perceive the transition, and what they need to cope with it. Oil shale may be polluting, but for many Ida Virumaa residents, including those whose families have worked in the industry for generations, it is a often a source of pride and identity.

“The question is, why do we need this wake-up call?” Anger-Kraavi asks. “We should pay attention to the region anyway.”

Isabelle de Pommereau is a journalist and reporter. Originally from France, she is based in Frankfurt and works as a correspondent for the Christian Science Monitor, Deutsche Welle and Alternatives Economiques.

energy, Estonia, Narva, Oil shale, Russia