Gazprom and Lithuania both claim victory in gas network arbitration

By bne IntelliNews August 2, 2012

Tim Gosling in Prague -

The long tussle over control of Lithuania's gas pipelines continues, with both Russian gas giant Gazprom and the Lithuanian energy ministry claiming victory in a international arbitration court ruling late on July 31. The contrasting statements leave the future of the Baltic state's gas pipelines - and the region's energy security - unclear.

Both Gazprom and Vilnius claimed that the independent arbitration tribunal in Stockholm has ruled in their favour in a dispute over governance of Lithuanian gas provider Lietuvos Dujos, reports Platts. Lithuania wants to unbundle the company, in which it owns 17.7%, and place control of a new gas network operator with the state. The move is key to the government's plans to diversify its energy sources; Russia currently supplies 100% of gas consumed in the Baltics. Lithuania plans to launch an liquified natural gas (LNG) platform in 2014, but it will be useless without control of the distribution system.

After a long and bitter fight, Gazprom - holding 37.1% in Lietuvos Dujos - voted for unbundling along with the other shareholders (E.ON holds 38.9%, with small minorities retaining 6.3%) in May, but immediately claimed that it had only done so under legal duress from Vilnius, claiming that the Lithuanian authorities threatened to apply sanctions on Lietuvos Dujos if the vote did not pass. The Russian company quickly launched the arbitration proceedings. The court was to decide on Gazprom's application to have governance of the company decided in arbitration, which it claims is in the shareholders agreement.

On the one hand, the Lithuanian energy ministry statement claims: "The arbitration acknowledged that Gazprom can by no means prohibit the Lithuanian government from questioning the eligibility of Lietuvos Dujos' management bodies." It added that the tribunal dismissed "all of Gazprom's claims for damages." But Gazprom said that the arbitration tribunal found in favour "for most of Gazprom's demands against the Lithuanian energy ministry, relating to the ministry's initiation of court proceedings against Lietuvos Dujos and its management for breaking the shareholder agreement."

A representative of the Stockholm Arbitration Tribunal declined to comment, citing confidentiality guarantees given to companies involved in arbitration. A spokeswoman for Lietuvos Dujos also declined to comment, saying it was a matter for shareholders rather than the operator to comment on.

Lithuania's energy ministry said the ruling is a sign that further dialogue over implementation of changes under the third energy package should not involve arbitration. "This positive decision once again demonstrates that the issues of Lietuvos Dujos' governance and those of the third EU energy package implementation in the gas sector should not be resolved by arbitration, but by negotiations," energy minister Arvydas Sekmokas claimed in the statement.

Gazprom said that the tribunal's ruling was instead an indication that arbitration should play a key role in the dispute, in line with the Lietuvos Dujos shareholder agreement. "The decision of the independent arbitration confirms the validity of Gazprom's position in the long-running dispute with Lithuania, in which the Lithuanian energy ministry has tried to win a decision on commercial issues in its favor with the help of Lithuanian courts, instead of taking the dispute to independent arbitrators, as is stipulated in the Lietuvos Dujos shareholder agreement," the statement said.

At the core of the dispute is the price of Russian gas imports to Lithuania, and indeed the Baltic region. Cut off by history from Euroean energy networks, Lithuania claims that it is paying the highest gas prices in Europe, but that the LNG terminal will give it the leverage to reduce them significantly. The Swedish tribunal also heard applications on the pricing arguments, but again both sides came away with very different impressions of its response.

"Arbitration stated that the issue of high gas price for Lithuania cannot be resolved during the same court procedures -- this question should be separately submitted to Stockholm arbitration," the energy ministry's statement said. Gazprom meanwhile claimed that the tribunal had ruled: "Lithuanian authorities do not have the right to appeal to Lithuanian courts with the aim of a forced change to conditions on the sale and transit of Russian gas, which had previously been agreed," the Gazprom statement said.

Related Articles

Drum rolls in the great disappearing act of Russia's banks

Jason Corcoran in Moscow - Russian banks are disappearing at the fastest rate ever as the country's deepening recession makes it easier for the central bank to expose money laundering, dodgy lending ... more

Kremlin: No evidence in Olympic doping allegations against Russia

bne IntelliNews - The Kremlin supported by national sports authorities has brushed aside "groundless" allegations of a mass doping scam involving Russian athletes after the World Anti-Doping Agency ... more

PROFILE: Day of reckoning comes for eccentric owner of Russian bank Uralsib

Jason Corcoran in Moscow - Revelations and mysticism may have been the stock-in-trade of Nikolai Tsvetkov’s management style, but ultimately they didn’t help him to hold on to his ... more

Register here to continue reading this article and 2 more for free or 12 months full access inc. Magazine and Weekly Newspaper for just $119/year.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

IntelliNews Pro subscribers click here

Thank you. Please complete your registration by confirming your email address. A confirmation email has been sent to the email address you provided.

Thank you for purchasing a bne IntelliNews subscription. We look forward to serving you as one of our paid subscribers. An email confirmation will be sent to the email address you have provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

If you have any questions please contact us at

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

IntelliNews Pro subscribers click here

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

Thank you. Please complete your registration by confirming your email address. The confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.