Slovakia secures Russian gas price discount

By bne IntelliNews March 31, 2014

bne -

Slovakia has negotiated a discount on Russian gas, the country's distributor SPP announced on March 28, illustrating the pressures at play as the EU strives to come up with a palatable response to Moscow's annexation of Crimea.

Slovensky plynarensky priemysel announced it has reached an agreement with Russia's Gazprom Export to adjust the wholesale, long-term contractual price it pays for gas to better reflect the lower prices on spot markets. "This agreement represents a move towards a more competitive position of SPP having a positive impact on its financial performance," the company said, according to the Wall Street Journal.

The company, which makes most of its profit from subsidiary Eustream, which operates the Slovak section of the mainline that carries Russian gas through Ukraine and on into Europe, did not provide details of the deal. The pair has been discussing the price of Russian gas supplies to the Slovak distributor for some time.

The deal comes as the EU works to challenge Gazprom's long-term dominance in gas supplies to the eastern end of the bloc, a factor seen as central to reticence in the region over the application of sanctions against Russia in response to the crisis in Ukraine. As part of the drive to ease Russia's leverage, Brussels is encouraging Central Europe to link its pipeline networks.

On March 27, Slovakia, which owns 51% of SPP, opened a new gas interconnector with Hungary. The link complements other recent routes which connect the Czech Republic, Poland and Austria, and is part of a larger scheme towards a network that will ease Russian leverage on individual countries by allowing trading between states from Poland to the Adriatic Sea.

However, with the pricing talks ongoing, Slovakia has suggested it's unenthusiastic to press the point. Last week, EuStream sat down in Brussels to talk over reversing part of its network in order to pump gas from elsewhere in the EU to Ukraine, which is struggling to pay its gas bill to Russia. Prime Minister Robert Fico was quick to urge caution. "We are ready to help them, but any kind of help has its bounds and it is economically limited," he said. "Slovakia's first priority is to ensure guaranteed and secure Russian gas deliveries through Ukraine to the country."

The Slovak state's partner in SPP, Czech utility Energeticky & Prumyslovy Holding, which owns the remaining 49% and also has management control, has made little comment. The ownership of EPH features Slovak financial group J&T, which is speculated to have close ties with Fico, and Czech billionaire Petr Kellner who has numerous business interests in Russia, mainly connected to the St Petersburg oligarch circle surrounding ICT group.


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