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Gazprom Strikes Back At Lithuania

Gazprom is proving for the umpteenth time that it’s willing to go to the mat with its natural gas customers. This time it’s Lithuania that is feeling the displeasure of Russia’s state-owned gas company, as Gazprom announced on Monday its intention to move forward with a plan to build a liquified natural gas (LNG) import terminal in Kaliningrad, a geographically isolated region of Russia. The LNG terminal will effectively deny Lithuania income from transporting Russian gas overland via a pipeline that travels through the Baltic state on its way to Kaliningrad.

This announcement can be seen as a response to Lithuania’s decision earlier this summer to nationalize its gas pipelines. Russia owns a 37 percent stake in the Lithuanian gas utility, which previously controlled both the production and distribution of the country’s natural gas. But Lithuania took advantage of an EU rule meant to prevent vertical monopolies and cleaved gas distribution from the utility, cutting Russia out and effectively nationalizing the network.

Gazprom’s plan for an LNG import terminal on the Baltic Sea would allow Russia to supply Kaliningrad with natural gas by ship, though the question of where Russia would source this LNG is still unanswered—Russia, for all of its resources, has just one facility capable of liquifying its natural gas for transport. Interestingly, Lithuania is also looking to build up its LNG import infrastructure so that it can decrease its reliance on Russian gas. While the two countries turn to the more expensive but more easily shipped form of natural gas as a way to spite one another, the world’s LNG exporters are the real winners here: they stand to gain two new customers.

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  • Andrew Allison

    While Gazprom’s wiillingness to act as an enforcer for Russia foreign policy is well-documented, this post appears to be a bit of a stretch. Reduced to its purely economic basis, Lithuania preempted the revenue Gazprom was receiving from delivery of gas, and Gazprom decided to seek an alternate revenue source. This seems rational rather than going to the mat.

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