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Lithuania shivers as Russia ramps up heating costs

Monday - 2/4/2013, 10:15am  ET

FOR STORY LITHUANIA HEATING BLUES - In this photo made Wednesday, Jan. 23, 2013, Vytas Ratkevicius, a resident of Vilnius, Lithuania, prepares to light his wood stove to heat his apartment as air temperatures dropped to around minus 20 Celsius. Gas prices have risen about 450 percent over the past seven years, forcing many Lithuanians to shut off their central heating and replace it with firewood burners to save money. (AP Photo/Mindaugas Kulbis)

LIUDAS DAPKUS
Associated Press

VILNIUS, Lithuania (AP) -- To save money during the harsh Baltic winter, Romanas Ziabkinas did something unremarkable: He turned off his central heating and installed a cheaper electric heater. Now he finds himself neck-deep in legal woes.

His utility company refused to recognize the switch and is suing him for some 25,000 litas ($10,000) in unpaid utility bills for his apartment in Lithuania's capital. "Splitting from the Soviet Union was easier than leaving this heating system," he says.

Ziabkinas plight is extreme, but his frustrations over heating costs are shared by a majority of Lithuanians, who have seen prices soar over the past several years, especially since the shuttering of its only nuclear power plant in 2009, forcing the country to import more Russian gas to keep warm. Lithuania's decision to scrap atomic power over safety concerns has put it under a new kind of threat: intimidation from Russia, which critics say shows no hesitation to use its energy dominance to bully former vassal states.

While gas prices have tended to fall globally in recent years thanks to deposits of shale gas in places like the U.S., Lithuanian households have looked on in horror in the past seven years as the retail cost of natural gas pumped from Siberia spiked 450 percent -- or from $169 to $769 per 1,000 cubic meters.

Lithuania, a country of 3 million people, currently pays Russia a wholesale price of about $540 per 1,000 cubic meters of natural gas piped from Siberia, roughly 15 percent more than Baltic neighbors Latvia and Estonia and 25 percent more than Germany.

Many Lithuanians feel they are being punished by Russia for unsolved political issues, just as the Kremlin has used gas supplies to goad Ukraine and Belarus over political and economic disputes.

Lithuania has demanded compensation from Moscow for alleged damages incurred during the Soviet occupation from 1945 to 1991, and last year enacted a European Union directive to separate gas supply and distribution, a direct blow to Russia's commercial interests in the country. Estonia and Latvia, which also receive all their gas from Russia, have done neither -- and, not surprisingly, enjoy cheaper prices.

Gazprom rarely comments on gas price deals with individual countries, using the secrecy to haggle with each individual nation separately -- playing one off the other -- in what is seen as an extension of Kremlin foreign policy.

Lithuania has a long-term supply agreement with Russia's state-owned gas monopoly Gazprom, which expires in 2015. Russia has justified the price rises by saying the deal allows it to index gas rates to oil prices. The catch is that Russia has given discounts to friendly nations, while sticking to the full price for those with which it has disputes.

"We believe Lithuania should pay a fifth less than it does now," Prime Minister Algirdas Butkevicius recently told reporters.

Lithuania's previous center-right government sued Gazprom in international arbitration court for 5 billion litas ($1.9 billion) over gas price hikes and has called on the EU to investigate the company's alleged unfair pricing policies. Butkevicius, however, is willing to scrap the litigation in exchange for cheaper gas.

Regardless of the legal outcome, heating now seems a luxury many Lithuanians can't afford -- and with tragic consequences. Last winter a 77-year-old pensioner in the southern district of Alytus was found frozen to death in his house. In another case, an 80-year-old woman who lived alone died in her bed in 2011, her body stuck to the frozen bed sheets.

Many people who can't afford their heating bill don't pay it, resulting in an increasingly large income hole that utilities fear they'll never recover. In Vilnius, the total amount of unpaid heating bills surpassed 40 million litas ($15 million) last year, while in Kaunas, Lithuania's second largest city, the number was $17 million.

Toma Gajauskiene, a 25-year-old Lithuanian language teacher, feels that she's drowning in unpaid heating bills for her apartment in a high-rise building. She earns some 1,200 litas ($460) per month and has a small child and unemployed husband to support.

"Last December was not too cold, but the heating bill stands at 500 litas, almost half of what I make," Gajauskiene said. "For January the bill will be at least double, but I simply cannot pay more than 300 litas for heating because my family will not have money to buy food."

Lithuanians also pay more for heating due to insulation problems stemming from the Soviet era. In the years after World War II, some 80 percent of Lithuania's population moved in less than a decade from villages to cities, where they were placed in Soviet apartment blocks hastily and without regard for efficient insulation.

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