Indomitable Lithuanians challenge Russia's Gazprom

The year is 2011 A.C. The European gas market is entirely occupied by the Russians ... Well not entirely! One small country of indomitable Lithuanians still holds out against the invaders.

Like Asterix and Obelix, the comic book characters from a fictional village celebrated as the only part of ancient Gaul that repulsed Roman occupation, Lithuania is also challenging Russian gas dominance. Okay, all jokes aside, Lithuania's President Dalia Grybauskaite announced on 13 July she had signed a law "unbundling" Lithuania's gas market -- an EU-piloted reform, meant to be in place by 2013 -- that bars suppliers from also running the gas-pipelines system. The reform challenges Russia’s Gazprom because it owns 37.1% of Lietuvos Dujos, the main gas distribution company in Lithuania, bought in 2004. Gazprom and Germany's E.ON Ruhrgas, which owns 38.9%, pressed Vilnius to seek an exemption from EU rules. But the Lithuanian government, which holds 17.7%, said ‘no can do.’ 

Konstantin Simonov, the General Director of the National Energy Security Fund in Moscow, told New Europe on 14 July, Lithuania is trying to use the EU Third Package as instrument of pressure on Russia. “Lithuania made a decision to implement the Third Package in the strongest scenario which is dangerous for Gazprom,” he said. “When other countries are still thinking what will be the real scheme of implementation, Lithuania without any compromises begun to struggle with Gazprom.” 

Gazprom and E.ON are shareholders in the gas distribution companies of all three Baltic countries. But Latvia and Estonia have adopted a wait-and-see approach. “The position of Latvia and Estonia seriously differs from the position of Lithuania. Lithuania begun to say: ‘There will be no compromises, we will eliminate Gazprom from our market.’ That is why today the gas price for Lithuania is higher than the gas prices for Latvia and Estonia,” Simonov said. Overall the three Baltic countries find it difficult to find alternative of sources gas, Simonov said, adding that they are called "energy islands" for good reason. 

To cut dependence on Russian gas, Lithuania has said it wants to build a liquefied natural gas (LNG) terminal at Klaipedos port by 2014 to obtain access to the gas spot market and possibly get shale gas from the US. 

Meanwhile, Gazprom is also playing hardball. “The position of Gazprom is very simple: ‘Okay guys, now you have 100 percent of dependence on our gas. You can now begin to struggle with us, you can use the Third Package in the strongest scenario, but in this case we will never give you discount on our gas,” Simonov said. 

On 12 July, Lithuania's President Grybauskaite accused Gazprom of treating unfairly her country of three million. The next day, Gazprom hit back at her claims that the gas prices the Russian company applied for Lithuania were political and not based on economics. "Lithuania's gas prices are not political," Gazprom spokesman Sergei Kupriyanov said. “The gas price in Europe can vary between different buyer countries and may change at different times within a signed contract," he said. And as far as Russian gas price for Lithuania is concerned, there's no way but up. Simply, to paraphrase Obelix's trademark line: “These Russians are crazy!”

By Kostis Geropoulos

New Europe, Jule 15, 2011