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03/12/2016

Lithuania denies Gazprom-bashing election ploy

Energy

Lithuania denies Gazprom-bashing election ploy

gazprom.jpg

Lithuanian representatives have denied trying to win votes in a forthcoming election by filing a €1.45 billion complaint against Gazprom with a Stockholm arbitration court.

“This has nothing to do with bashing Russia, it is about a case which has been ongoing for a year and a half now,” a senior Lithuanian diplomat told EurActiv.

Yesterday (3 October), Vilnius filed a case against the Russian gas giant, seeking five billion litas (€1.45 billion) compensation for an alleged overpayment for gas supplies.

The complaint will be heard at the Stockholm Chamber of Commerce’s arbitration institute, although Gazprom is understood to see the move as a ploy aimed at winning votes in the upcoming Lithuanian elections. The first round of parliamentary elections are scheduled on 14 October.

“It is a little bit of Russia and Gazprom bashing,” one source said. “The timing is very suspicious in this case as the minister who announced this today will not see it through to its conclusion.”

The incumbent centre-right government is considered significantly cooler towards Moscow than the centre-left opposition, which is currently leading in the polls.

But an incoming Socialist government “would continue to prosecute the case,” the diplomat from Vilnius said. “This is a violation of the privatisation agreement and it would be really misunderstood by the population if the next government recalled the case.”

Lithuania’s case

Lithuania’s case is that gas prices surged between 2004 and 2012, following a deal between Gazprom and the country’s then-newly privatised natural gas company AB Lietuvos Dujos – in which Gazprom itself owns a 37% stake.

Vilnius says the price increases stemmed from Gazprom unilaterally changing an agreed gas pricing formula, and argues that the Stockholm arbitrators have already ruled in their favour in July 2012.

The tribunal also ruled that issues regarding gas price disputes could not be heard by national courts, leaving Lithuania “no choice but to go back to the arbitrators,” the diplomat said.

“Imagine if you had a major agreement you could prove, and you had an election beforehand. Would you wait until after the elections to go to court or do it when you can?” the diplomat asked.

But the last arbitration ruling took two years, and the new case may follow a similar timeline.

EU pressure

Moscow’s relationship with the EU has come under pressure since the European Commission opened an investigation into claims that it had violated anti-trust obligations in the Commission’s “third energy package”.

Last month, Russian news media reported that the country would “unbundle” its retail and transmission wings so as to comply with the EU rules.

The current case though is thought less likely to influence that issue, than the potential contract disputes still simmering between Gazprom and other east European countries.

“It may [influence them] because experience shows that other countries went to arbitration and achieved some sort of gains,” a source said.  

Negotiations between Vilnius and Moscow are expected to proceed in parallel with the arbitration case in Stockholm.  

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).

 

Further Reading