The Luxury of Being Wrong
The Baltic states did not predict Russia and China better than anyone else. They simply could not afford to be wrong about either, and priced both risks while it still looked absurd to do so.
In October 2014, a ship arrived in the Lithuanian port of Klaipėda. It was a floating terminal for liquefied natural gas, and the government had given it a name that left little room for interpretation: Independence. The project was widely considered an extravagance. The terminal could handle around four billion cubic meters of gas a year, more than the entire country consumed, and it existed to replace Russian pipeline gas that flowed cheaply and, as far as most of Europe was concerned, reliably. A small country of under three million people had bought insurance against a risk that Europe’s largest economies had examined and dismissed.
Eight years later, Germany, Italy, and Austria were all chartering floating LNG terminals of their own, in a hurry, after the pipeline gas their industrial models had depended on stopped flowing. The insurance Lithuania had been mocked for buying in 2014 turned out to be the policy half the continent needed in 2022.
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The easy conclusion is that the Baltic states saw the future and Berlin did not. It is also the wrong conclusion. Estonia, Latvia, and Lithuania did not have better information about Russia. What they had was a different relationship to being wrong. For Germany, a misjudgment about Russian reliability was an energy pricing problem. For the Baltic states, the same misjudgment is existential. When the cost of error is survival, you act on warnings that larger countries can afford to file away.
A large state believes it can absorb almost any shock, so it treats hedging as an unnecessary expense. A small, exposed state knows it cannot absorb the shock, so it pays the premium early, when the premium still looks absurd. The information available to both is identical. The behavior is not, because the price of being wrong is not.
Smallness alone does not produce this. Denmark is small. Portugal is small. Neither read Russia earlier than anyone else, because neither sits where the Baltic states sit. It is the combination, small and exposed, that removes the luxury of optimism. The Baltic states are not clairvoyant. They are simply the part of Europe where wishful thinking about Moscow was never affordable.
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The pattern extends well beyond energy. On February 9, 2025, the three countries disconnected their electricity grids from the Russian-controlled network they had been wired into since the Soviet era and synchronized with continental Europe instead. The switch took more than a decade of preparation and considerable money, and it was carried out while much of Europe still described interdependence with difficult neighbors as a source of stability. The Baltic view was older and colder: a grid your adversary controls is a switch in someone else’s hand.
The sharpest test, though, came from China rather than Russia. In 2021, Lithuania allowed Taiwan to open a representative office in Vilnius under the name “Taiwanese” rather than the diplomatically safer “Taipei.” Beijing responded with the heaviest economic pressure it has directed at any European state: Lithuanian goods stopped clearing Chinese customs, and multinational companies reported pressure to remove Lithuanian components from their supply chains.
Except that the pressure failed. Lithuania survived it, essentially intact, because China accounted for less than one percent of Lithuanian exports. There was very little to coerce, and that was not luck. A country that knows it cannot afford dependency does not build it in the first place, and a country without dependency turns out to be remarkably difficult to blackmail. Compare that with Germany, France, and the Netherlands, which spent the same decades deliberately deepening their exposure to the Chinese market, each on the theory that a large, diversified economy could absorb a risk a small one could not. Volkswagen no longer has a China policy. It has a China exposure, and the exposure sets the policy. ASML and the French luxury conglomerates made the same bet in different sectors, for the same reason: the market was too large to walk away from, and the downside looked too diffuse to price.
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Lithuania has now lived both halves of the question every diversifying economy eventually asks: what hedging costs before the crisis, and what it is worth during one. The cost was real, a terminal bought before it was needed, a decade of grid investment, a bruising and initially pointless-looking confrontation with Beijing. The value was also real. When the test came, Lithuania was the one country in the exchange that could not be squeezed.
None of this makes small states models to copy. Their caution was never chosen; it came with the geography, and countries with more weight and more distance will always be tempted to believe that size is itself a form of protection. Sometimes it is. But the past decade suggests a different way to read Europe’s map. What looked from Berlin like Baltic paranoia in 2014 was something more ordinary: three small countries pricing a risk the rest of the continent had decided not to see. The risk did not care who priced it.
THE VERDICT
The logic does not stop at Vilnius. Strategic autonomy remains, in Brussels, a doctrine no government has funded for the same reason Berlin bet on Russian gas and Beijing’s demand: the cost of hedging is concentrated and immediate, the benefit is diffuse and arrives after the next election. Large economies can defer that trade almost indefinitely, because deferral rarely costs anyone a seat. Small, exposed states cannot defer it, which is why the Baltics built a terminal nobody needed and left a grid nobody was forcing them to leave. The choice was never about foresight. It was about who gets to wait, and for how long. Somewhere between Taiwan’s chip fabs and Europe’s own unbuilt defense-industrial base, the same wager is being made again, by capitals that have not yet had to find out what their premium would have cost.
This piece is adapted from "The Luxury of Being Wrong," published in Rajasthan Patrika on 27 July 2026 as part of the monthly "Letter from Europe" column. Rajasthan Patrika, one of India's largest Hindi-language daily newspapers, carries the column on a monthly basis.