Gazprom pressures Lithuania over gas unbundling

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 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.

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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%.
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. 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.

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.