The Lithuanian government intends to
file a $1.9 billion claim against Gazprom, alleging that the gas company has
unfairly been charging an inflated rate. The claim incorporates all overpaid
costs since 2004, when Gazprom acquired a major interest in Lietuvos Dujos,
Lithuania’s largest gas importer. Lithuania imports all its natural gas from
Russia, and it has paid up to $490, per 1,000 cubic meters of gas, far greater
than other European nations. The claim alleges that Gazprom uses unfair methods
of calculating gas costs. Consequential, Lithuanian consumers have seen their
energy bills grow exponentially. This comes a month after the European
Commission launched a probe to examine similar allegations. The Permanent Court
of Arbitration conducted under the 1976 UNCITRAL Arbitration Rules will decide
the claim. Both nations are bound to the ruling by the Agreement Between the
Government of the Russian Federation and the Government of the Republic of
Lithuania on the Promotion and Reciprocal Protection of Investment of 29 June
1999.
Claims similar to these are nothing
new and perpetuate a negative perception about both the way Russian companies do
business and doing business in Russia. At a time when Russia’s economy is experiencing
stagnation in growth, it is imperative that its leadership work to recreate its
image and invite foreign investment. A significant reason for this decline is
the waning in its oil productive and reduced demand for its oil. There seem to
be two paths Russia can take. One in which it continues “us against the world” mentalities
and plays by its own rules, relying on its vast energy reserves. Conversely,
the Federation may, and seems to be, diversifying its economy and improving the
investment climate for foreigners and locals alike.
Russia has notoriously been regarded
as a difficult place to do business, ranking 120th according to the World
Bank. Corruption and lack of uniformity in the enforcement of its laws deserve
much of the blame. These issues have resulted in a lack of productive in
Russian labor and inefficient factories and other means of production. Accession
to the WTO will likely force the door to Russia open but it is for the government
to decide how much. President Putin has announced a number of initiatives that
will make it easier to invest in the nation, such as fixing its tax laws and
allowing direct investment in securities markets. The leadership has aspirations
of transforming Moscow into a hub for financial firms. While this rhetoric is a
step in the right direction what effects it may have are to be determined. It
is virtually impossible to change the perceptions and behaviors of Russian people
as well as potential foreign investors in a short span of time. In a country
where it is widely accepted practice to slip a couple hundred rubles to a police
officer to avoid a ticket, or have to pay bribes to multiple government workers
before establishing a business, increasing investor confidence will be a difficult
task. If Putin truly does have ambitions of increasing investment, Gazprom’s
price gouging techniques will have to cease and Russia will have to play by
customary international rules.
http://www.washingtonpost.com/business/lithuania-hits-russias-gazprom-with-19-billion-arbitration-claim-for-alleged-price-gouging/2012/10/03/44d36d5e-0d4e-11e2-ba6c-07bd866eb71a_story.html
Gas and oil business often leaves a funny smell. I can’t defend the Russian side, but it is curious as to why the Lithuanians continued to buy this expensive gas. Did they sign a contract with Gazprom for gas at a certain price? If so, perhaps they were merely abiding by the stipulations in the contract. It does appear to be a tad disingenuous to file a lawsuit for goods already consumed (even if they were purchased at inflated prices). What is the Russian press writing about this lawsuit?
ReplyDeleteThanks for the comment. Lithuania is bound because of an obligation from an obligation from a contract with Gazprom. Their options are limited, which leaves them in a vulnerable position. I will look into what the the question of, what Russian press is saying about the issue.
ReplyDelete