Poland warns Russia not to leave it out of gas price cuts again

By bne IntelliNews December 21, 2012

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Despite finally securing a discount after a long campaign in November, in a bid to keep up the Europe-wide pressure on Russia over the price of its gas, Poland threatened on December 20 to restart arbitration proceedings should it be left out of anticipated price cuts for major European customers in 2013.

Polish gas monopoly PGNiG will relaunch its legal case against Russia's Gazprom if it isn't included in the group of European companies reportedly supposed to benefit from lower prices, said Treasury Minister Mikolaj Budzanowski, according to Dow Jones. "If we don't immediately get the discount, we'll intervene and again file an arbitration law suit," he threatened. "But I don't think it will come to this. Since 2004, we've been in the European Union and since forever in Europe."

Reuters cited an unnamed source at Gazprom on December 18 saying that the company is likely to cut long-term contract prices to Europe next year to levels comparable to the spot market, as it looks to defend its dominant position on the market against challenges from LNG suppliers and projects to circumvent Russian routes to ship Central Asian gas in to Austrian hubs.

At the same time, the countries of CEE, as well as Brussels, have upped their bids to join the pressure from major European customers for Gazprom to cut its prices. With US shale gas and LNG having helped slash spot prices already under pressure from lowered demand provoked by Europe's slowdown, Russia has been slowly handing out limited price discounts to selected customers over the past 18 months.

For the most part it is those in Western Europe - generally larger and less reliant on Russian supplies - that have benefited, while those to the east, who are more closely plugged into Russian energy networks, have faced a far tougher battle. That forced Poland to launch international arbitration earlier this year, a bid it dropped last month as Gazprom handed it a 15% price cut.

However, several other states are seeking similar cuts - Lithuania has also launched legal proceedings for instance - and their bids are encouraged by moves from Brussels to step up the pressure. While the EU continues to insist that Russia's giant infrastructure projects South and Nord Stream must offer access to third party suppliers, the European Commission launched a widescale investigation into alleged market abuse by Gazprom in the autumn.

Following the latest reports of more price cuts on the way, it appears Poland is keen to avoid being faced with another potential fight by being cut out of the deal again. The warning from the treasury minister came after Polish media concluded that the new cuts are set yet again to benefit only Western European customers.

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