Lithuania, Gazprom lock horns over gas reform plans

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Lithuania on Wednesday locked horns with Russian giant Gazprom, its only gas supplier, over a government drive to reform the Baltic state's energy market.

Prime Minister Andrius Kubilius told reporters his centre-right administration would forge ahead with plans to "unbundle" the country's gas system, separating bulk supply from that piped to consumers.

"When the directive is implemented, Lithuanian consumers will have the possibility to get rid of the monopolistic Gazprom gas supply," Kubilius said.

Gazprom, meanwhile, warned that it would contest the move unless the government gave way.

"We may turn to international arbitration to demand damages," the Russian group said in a letter to the Lithuanian government obtained by AFP Wednesday.

Gazprom, which is a major shareholder in local gas company Lietuvos Dujos, accused Lithuania of unwillingness to negotiate.

Kubilius hit back, saying: "Draft laws will be discussed with all concerned partners on an equal basis. No player will have privileged rights to influence the project".

Currently, gas supply and distribution in Lithuania are both controlled by Lietuvos Dujos, in which Gazprom has a 37.1 percent stake.

The other major shareholders are Germany's E.ON Ruhrgas International, with 38.9 percent, and the Lithuanian government, with 17.7 percent.

Under the plan, gas supply will be separated from gas transmission.

Kubilius said the unbundling -- in line with the rules of the European Union which Lithuania joined in 2004 -- was also crucial for the success of a liquefied natural gas terminal that it plans on the Baltic Sea.

The nation of 3.3 million is seeking to cut its dependence on supplies from Russia, a legacy of its five decades as a Soviet republic before the communist bloc collapsed in 1991.

Lithuania's gas arrives via pipeline across Belarus and it has been hit by feuds between Moscow and Minsk.

In June, its supplies fell by more than 40 percent amid a row between Belarus and Russia over gas payments and transit fees.

© 2010 AFP

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