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29/09/2016

Gazprom pressures Lithuania over gas unbundling

Energy

Gazprom pressures Lithuania over gas unbundling

gazprom_pipeline.jpg

Russian energy giant Gazprom wants Lithuania to hold talks on plans to unbundle the gas sector, as doing so would hurt its investment in the country, the company said in a letter seen by Reuters on Wednesday (25 August), which also threatens court action. Lithuania reacted strongly to the pressure.

The Lithuanian government has decided to separate gas supply and transport assets to increase competition and drive prices down. It says this policy is in line with European Union regulations, but it still has to approve a draft law.

"The draft law proposed by the energy ministry foresees the implementation of the [gas] directive in such a way that it would have the most negative effect on our investments," Valery Golubev, the deputy chairman of Gazprom's board, said in a letter to Lithuania's prime minister.

Gazprom said in the letter it could turn to a court of international arbitrage to claim compensation for losses if Lithuania does not start consultations over its gas sector reform.

Lithuanian Energy Minister Arvydas Sekmokas said both Gazprom and Germany's E.ON Ruhrgas had been invited to join the working group to draft the bill but added that Lithuania would not bend under pressure and would adopt the law by next March.

Sekmokas said demands from the two companies could be seen as "pressure from large companies on a small country".

The government wants unbundling to be completed by March 2012, in line with an EU deadline, he added.

In 2004 Gazprom invested $35 million to buy 37.1% of Lithuania's main gas company Lietuvos Dujos, of which E.ON has another 38.9% while the state owns 17.7%.

(EurActiv with Reuters.)

Positions

Lithuania won't allow threats of legal action by OAO Gazprom and E.ON AG, owners of the country's natural-gas utility, to thwart efforts to open the market to competition, Energy Minister Arvydas Sekmokas said on 25 August, quoted by Bloomberg.

"The tone of the E.ON and Gazprom letters is in the spirit of an ultimatum addressed to the highest heads of the state," Sekmokas said at a news conference in the capital, Vilnius. "Threats about arbitration" in this case "can be perceived as pressure by large companies on a small country," he said.

The Russian press recalls that Lithuania had voiced its readiness to build the Amber pipeline, intended to link the three Baltic countries to the EU gas network, bypassing Russia. The new pipeline, with a capacity of 5bcm per year, would enter Lithuania from Poland. Its capacity is judged sufficient to satisfy the gas needs of Lithuania, Latvia and Estonia, and its cost is estimated at 600 million euros, RosBalt Business website writes.

Background

The liberalisation of European gas and electricity markets aims to give consumers the chance to freely choose their supplier and shop around for the best deals (see EurActiv LinksDossier on the 'Liberalisation of the EU gas sector'.) However, there have been few new entrants to the market and most households and businesses still lack a real choice of supplier.

In May 2006, the European Commission conducted a series of surprise inspections of the offices of large European companies - including E.ON, RWE, Gaz de France, Distrigas and OMV - on the suspicion that they were restricting competitors' access to pipelines and gas storage facilities and engaged in 'market-sharing' practices (EurActiv 18/05/06).

The findings persuaded the EU executive to propose a third energy liberalisation package, tabled in September 2007. A compromise deal on the legislative package was struck on 23 March 2009. But some voices are warning that the gas sector must be treated with extra caution as the current proposals are causing tensions with Europe's largest supplier, Russia.

Lithuania, a former Soviet republic and an EU member since 2004, is highly dependent on energy imports from Russia. The country recently shut down its nuclear power plant in Ignalina, raising fears of even greater energy dependency on Russia (EurActiv 04/01/10).

Timeline

Further Reading