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Estonia to Reduce Russian Energy Dependence

Estonia’s Parliament will accept a bill allowing the separation of AS Eesti Gaas’s natural gas sales and transmission divisions in two years to reduce dependence on Russia’s Gazprom.

A draft bill requiring Eesti Gaas AS, an Estonian natural gas company which imports and sells natural gas, to split the ownership of sales and networks by Jan. 1, 2013 is “90 percent ready,” said Igor Grazin, a lawmaker with Prime Minister Andrus Ansip’s Reform Party, in a interview with Bloomberg.

The new bill would include the requirement of a forced sale for the Eesti Gaas transmission unit if a buyer is not found and a fine of US$44,622, Grazin said.

Eesti Gaas is owned by Gazprom (37.02 percent), Germany’s E.ON Ruhrgas (33.7 percent), Finland’s Fortum Oyj (17.72 percent), and Itera Latvija (9.9 percent).

The transmission division would be sold to a company based in the European Union.

Earlier this year, Lithuania announced a similar plan at Lietuvos Dujos AB, spurring criticism from Gazprom and Germany’s E.ON AG, which also has a stake in Eesti Gaas.

In order to connect Lithuania, Latvia and Estonia to wider EU energy networks and to unify the Baltic electricity grid, the EU Commission and its Baltic members signed the Baltic Energy Market Interconnection Plan in June 2009.

At present, Baltic countries pay the highest prices in the EU for Russian gas. Estonia bought Russian fuel in the first quarter at US$340 per 1000 cubic metres. At the same time, Gazprom was selling gas to Europe for an average of US$307 for the same volume. Prices for natural gas in Lithuania are US$100-150 above the gas prices in Western Europe.

“We can resist an uncontrolled rise of gas prices only by fighting the Gazprom monopoly,” said Rauno Veri, a spokesman for the junior government partner, Isamaa ja Res Publica Liit.

In an interview with Estonian business newspaper Äripäev, Raul Kotov, board member of Eesti Gaas, insisted that separation does not bring new suppliers, reduce the prices, nor reduce Gazprom’s importance in the gas that’s used in Estonia.

Kotov also argued that the ruling coalition’s allegation that Gazprom is barring newcomers from the market is wrong, as 63 percent of Eesti Gaas belongs to non-Russian enterprises, so Gazprom cannot decide on the destiny of the Estonian gas economy.

According to Kotov, gas prices aren’t more expensive in Estonia than in the rest of Europe. In July, the gas price in Estonia is 0.43 euros per cubic meter, while in Hamburg, Germany the price is 0.7 euros per cubic meter and in Finland 0.65 euros per cubic meter.

Gazprom Deputy Chief Executive Officer Alexander Medvedev warned the EU on October 14 that changes in pipeline ownership and a move away from long-term contracts may lead to a drop in supply and a shift in Russian gas exports to Asia.

Gazprom, which has traditionally accounted for about a quarter of Europe’s gas needs, supplied 140.6 billion meters of the fuel last year.

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