Gazprom Contests Lithuanian Competition Council Fine
Russian Gazprom is determined to contest a $48 million fine imposed by the Lithuanian Competition Council (LCC) at Lithuania’s Vilnius Regional Administrative Court (VRAC) after it accepted Gazprom’s complaint. Lawyers following the case told Natural Gas Europe the Russian company stands little chance, but the fine will be likely reduced.
The LCC fined the Russian gas giant in June for anti-competitive behavior, stemming from overcharging customers and blocking rival suppliers.
The Council came to the decision to punish Gazprom after investigating the multiple attempts by Lietuvos Energijos Gamyba (LEG) to sign a gas exchange deal with the Russian supplier.
The Council concluded that Gazprom’s refusal to negotiate a swap deal in 2012-2013 prevented the Lithuanian power producer from purchasing natural gas from other suppliers.
The Competition Council qualified Gazprom’s actions as violating competition rules and the conditions of the 2004 contract for the purchase of a 34 percent stake in Lithuanian gas supplier Lietuvos Dujos.
The contract was approved on the condition that the Russian company would not impede Lithuanian consumers from seeking alternative suppliers.
In February 2012, LEG found a cheaper gas supplier in Western Europe and asked Gazprom Export to sign a gas swap deal to exchange the gas LEG planned to purchase in Western Europe for the gas that the Russian company delivered to Lithuania via Belarus.
Behind the Lithuanian request laid the infeasibility of physical delivery, but Gazprom refused to do so.
“This possibly led to negative consequences for Lithuanian electricity and heat consumers as prices of electricity and heat energy produced by Lietuvos Energija possibly increased due to Gazprom’s more expensive natural gas,” the LCC statement read.
The fine was calculated based on Gazprom’s 2012 revenues from the sale of gas to LEG, the timeframe of the violation and related risks.
The fine comes at a time when the European Commission is about to complete its investigation into Gazprom’s unfair pricing practices in Lithuania and other Eastern European countries and when a Stockholm Arbitration Court is hearing a $1.8 billion lawsuit filed by the Lithuanian Government against the Russian gas monopoly.
“I think the Lithuanian Competition Council’s prospect at court to have the ruling upheld is pretty good. But I believe the penalty will be mitigated and the fine will be reduced citing some justifiable and therefore penalty-alleviating circumstances. The Court has a very solid reputation as a strong defender of state and public interests. Besides, the negative reputation Gazprom has both in Lithuania and Europe will also weigh the justices,” Gytis Kaminskas, a lawyer, told Natural Gas Europe.
In early May Gazprom cut the gas price for Lietuvos Dujos (Lithuanian Gas) by 20 percent.