Lithuania's $135m debt to Gazprom

Is Gazprom owed?

Gas giant Gazprom is claiming that Lithuania owes them US$135 million after the country made changes to a deal on heat prices. Gazprom apparently took a loss and wants the Lithuanian government to compensate them accordingly.

According to Gazprom, their power plant in the region - Kauno Ternofikacine Elektrine - has said the losses occurred from 2003 to 2008 and want the compensation for this time period.

On its website, Gazprom posted parts of a letter sent to Lithuanian Prime Minster Andrius Kubilius.

"It is estimated that the Russian gas consortium … lost 342.2 million litas due to the Lithuanian government changing the methodology of setting heating prices," the web site said.

"Therefore, Gazprom has proposed to reach an amicable settlement with Lithuania … for it to pay that sum as compensation for the loss suffered."

The letter said Gazprom would seek international arbitration if necessary.

Compensation dispute

However, the Lithuanian government are saying that it is not their fault and they are a merely a third party. They claim that Gazprom's compensation claim arose from a dispute between KTE and Kauno Energija — a utility company owned by the Kaunas municipality.

According to the Moscow Times, Kauno Energija has declined to comment on Gazprom's compensation claim, however it said on Feb. 17 in a statement that there had been a commercial arbitration in a dispute over an investment protection treaty and that KTE should pay it 5.4 million litas.

Gazprom, as you'd expect, is a major shareholder in the gas companies of all three Baltic states, along with German E.On Ruhrgas. It is also the sole supplier of gas to the country.

Considering what has happened to past countries that have failed to pay their gas bills on time, Lithuania would be prudent to take caution in their actions when dealing with Gazprom and the issue of unpaid debts.

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