Lithuania says Gazprom breaching contract

3rd March 2011, Comments 0 comments

Russian gas giant Gazprom has breached a contract with Lithuania and is putting political pressure on the Baltic nation's government, Lithuania's energy minister said on Thursday.

"Lithuania has gathered proof that Gazprom is supplying gas to us at an unfair price. This is a breach of contract," Energy Minister Arvydas Sekmokas told reporters.

In a statement, his ministry said: "Gazprom is discriminating against Lithuania's natural gas consumers and putting political and economic pressure on the government."

Sekmokas warned that unless Gazprom negotiated new prices within 60 days Lithuania would seek international arbitration.

"We hope that Gapzrom will end this breach and will apply a fair price for Lithuanian consumers," he added.

He did not elaborate, saying what constituted a fair price was a matter for technical experts.

Gazprom, Lithuania's sole gas supplier, signed a contract with the Baltic state in 2004 that gave it a one-third stake in Lithuania's gas distributor Lietuvos Dujos.

Gazprom and the Lithuanian government have for months been locked in a war of words over the Baltic state's gas market reforms, which fall under new European Union rules that came into force Thursday.

In January, Lithuania said it had asked the European Commission to probe what it alleged was Gazprom's abuse of its market clout.

The Brussels-based Commission is the executive body of the 27-nation EU and polices its trade and competition rules -- and has powers to impose huge fines in the case of breaches.

Gazprom has rejected Lithuania's allegations.

The battle has centred on Lithuania's drive to respect EU energy market reform rules by "unbundling" the country's gas system, separating bulk supply from that piped to consumers.

Gazprom and another major Lietuvos Dujos stakeholder -- E.ON Ruhrgas International from EU member Germany -- have pressed Lithuania to ask Brussels for an exemption from gas market reform rules but Vilnius has refused.

Gazprom has reportedly said it would deny Lithuania gas discounts offered to neighbouring nations unless Vilnius fell into line.

Lithuania, a nation of 3.2 million, joined the EU in 2004.

It is seeking to cut its dependence on gas supplies from Russia, a legacy of its five decades as a Soviet republic before the communist bloc collapsed in 1991.

© 2011 AFP

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