Latvian government in double jeopardy with EU, Latvijas Gaze

  • 2005-05-18
  • From wire reports
RIGA - Latvian government officials said they would seek the European Commission's permission to put off deregulation of the natural gas market until at least 2010 and also make a special agreement with Latvijas Gaze to avoid litigation over exclusive rights that the company currently possesses.

Economy Minister Krisjanis Karins said that under EU requirements the deadline for gas market liberalization can be extended for up to 10 years from the signing of a long-term gas supply agreement. Since Latvijas Gaze signed a gas supply agreement Russia's Gazprom, one of its shareholders, in 2000 and 2004, the government may ask Brussels for an extension until 2014 or, in the worst case, 2010, explained Karins.

Under the privatization agreement, however, Latvijas Gaze has exclusive rights to natural gas transmission, storage and trade until 2017.

Karins said that the ministry and Latvijas Gaze shareholders were also working on an agreement under which the gas company would not litigate against the state until 2017.

Germany's E.ON Ruhrgas International, the company's largest shareholder, said this week that for now it was not intending to sue Latvia. A company representative, Tatjana Kurganova, told the Baltic News Service that E.ON Ruhrgas believes it is possible to liberalize Latvia's gas market in accordance with EU requirements while at the same time observing all provisions of the privatization agreement.

E.ON Ruhrgas hopes that this issue will be solved and "that a solution acceptable to all parties" will be found. "We do not see any reason for legal disputes at the moment," Kurganova said.

Latvijas Gaze President Adrians Davis has warned that the company may initiate litigation if the government undertakes measures to liberalize the gas market. He suggested setting up a working group and agreeing upon a postponement of several deregulation requirements under EC directives.

Karins, for his part, said that in order to reduce losses for the state, it is necessary to pass the amendments to the energy bill and continue negotiations with the company.

Latvia faced a similar predicament in the telecommunication industry in 2003 when, pursuant to EU regulations, it was forced to liberalize the land-line telephone market while at the same time grant TeliaSonera, the Scandinavian operator, monopoly rights until 2013 in accordance with the privatization agreement.

At the same time Latvia could face penalties if it fails to meet EU requirements on gas market liberalization if it fails to adopt respective amendments to its energy law by May 19. The country has received two warnings so far from the European Commission for its failure to do so.

This month the government has to provide a response to the last of these warnings.

Parliament has considered amendments to the energy law designed to liberalize the market, but the legislation has been stuck in the first reading for about a year now. The draft law envisages that any household and commercial consumer should be able to purchase natural gas not only from the monopoly LG but also from other gas traders.