Lithuania Loses Gazprom Price Case

Stockholm's international arbitration court has ruled against Lithuania, which filed a €1.4bn ($1.6bn) case against Gazprom for allegedly unfair gas prices.

The decision comes ahead of the conclusion of the European Commission's probe into allegations that Gazprom has abused its dominant position in former Soviet bloc countries. The probe was launched some years ago and was investigating Gazprom's pricing methods, including an industry standard: oil-price indexation.

The court rejected all allegations regarding an “unjust gas price” for deliveries Gazprom made to Lietuvos Dujos between 2006 and 2015, Gazprom said in a statement expressing its satisfaction and adding that the decision is final and not subject to revision. Gazprom was a major shareholder for Lietuvos Dujos until June, 2014, when it sold its shares to comply with the EU third energy package.  

Lithuania was seeking compensation from Gazprom claiming it had been overcharged for gas supplies between 2004 and 2012, said the Baltic state's energy ministry.

Klaipeda LNG terminal  (Credit: Klaipedos Nafta)

In 2004, after acquiring shares in Lietuvos Dujos, Gazprom signed a contract for gas supply to Lithuania at a fair price, taking into account the energy resources market in Lithuania and alternative fuel price dynamics, the ministry said. However, since then, the gas price formula had been amended more than once, regardless of Gazprom’s contractual obligations and the conditions of the Lietuvos Dujos share purchase. As a result, the price for gas consumers has increased dramatically.

Arbitration noted that the term "fair price" (just price) is too vague to be able to assess the potential damage and award the compensation. 

According to Lithuanian energy minister Rokas Masiulis, the claim ended a long and difficult struggle with the Russian giant. “Conclusions confirmed that we were going the right way, Gazprom had a conflict of interest, which disappeared with the implementation of the EU third energy package,” he was quoted as saying in a statement. “After all, we started legal proceedings against Gazprom and built a liquefied natural gas terminal. As a result Gazprom has been forced to reduce gas prices and users saved more than €100mn/year,"  he said.

Minister Rokas Masiulis (Credit - energy ministry website)

Lithuania was disappointed by the decision, according to the minister. The arbitration costs had been split between the two parties – €500,000 each.

Masiulis also said that Lithuania has reached all strategic objectives of reforming the gas sector, regaining control on its gas infrastructure and had installed a liquefied natural gas terminal for importing gas from Norway, which ended Gazprom's monopoly in the market. He said that competition led to a rapid fall in prices for domestic consumers, although sceptics point out that the fall in oil prices, to which gas prices are linked, was also dramatic.

Kama Mustafayeva