Cablegate: Gazprom and Latvijas Gaze Agree On New Natural Gas Supply

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PP RUEHAG RUEHAST RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN
RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHRA #0930 3551101
ZNR UUUUU ZZH
P 211101Z DEC 07
FM AMEMBASSY RIGA
TO RUEHC/SECSTATE WASHDC PRIORITY 4609
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
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RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS RIGA 000930

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ENRG EPET ECON PREL RS LG
SUBJECT: Gazprom and Latvijas Gaze agree on new natural gas supply
contract

1. Latvijas Gaze (LG), the central natural gas provider in Latvia,
announced on December 14 that it had reached agreement on a new
supply contract with Gazprom for 2008-2010. In line with Gazprom's
pricing policy and its efforts to even out gas prices across Europe,
the new tariff for Latvia will be higher than in previous years.
The rate will be in part tied to the global price of oil, and LG
projects an overall increase of up to 50% relative to 2007.

2. Andris Piebalgs, the European Commissioner for Energy and a
native Latvian, in a recent interview with Diena, Latvia's largest
newspaper, expressed concerns about Latvia's firm opposition to EU
initiatives on dividing up energy markets and limiting monopolistic
behavior. Piebalgs stressed that Latvia should be working on
decreasing its dependency on a single energy provider, not vice
versa. Piebalgs specifically criticized Latvia's resistance to the
so-called "Gazprom clause" that calls for separation of energy
production and the ownership of supply infrastructure, such as
pipelines. He noted that the clause would help Latvia decrease its
dependency on its only natural gas supplier - Gazprom, and added
that not having control over the supply infrastructure will prevent
Latvia from choosing an alternative natural gas supplier in the
future.

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