Viewing cable 07RIGA4
Title: No surprises in Latvian gas deal for 2007

IdentifierCreatedReleasedClassificationOrigin
07RIGA42007-01-03 13:54:00 2011-08-30 01:44:00 UNCLASSIFIED Embassy Riga
VZCZCXYZ0014
RR RUEHWEB

DE RUEHRA #0004 0031354
ZNR UUUUU ZZH
R 031354Z JAN 07
FM AMEMBASSY RIGA
TO RUEHC/SECSTATE WASHDC 3662
INFO RUEHMO/AMEMBASSY MOSCOW 1172
RUEHVL/AMEMBASSY VILNIUS 3786
RUEHTL/AMEMBASSY TALLINN 3990
RUEHBS/USEU BRUSSELS
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
UNCLAS RIGA 000004 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ENRG PGOV PREL RS LG
SUBJECT: No surprises in Latvian gas deal for 2007 
 
 
¶1. Latvijas Gaze (Latvian Gas - LG) announced December 29 an 
agreement with Gazprom on 2007 natural gas prices. According to LG, 
the wholesale price per 1000 cubic meters (tcm) of gas will increase 
by 50 percent starting January 1, 2007 to USD215 per tcm. LG expects 
another price increase in 2008 (by about 30 percent), which will 
bring the costs of natural gas for Latvia close to Western European 
levels. The price increase was not unexpected.  Throughout the year, 
LG representatives had been preparing the public for a price rise 
and Gazprom has long talked about moving Latvia to the same market 
prices as other EU member states 
 
¶2. Although the cost of the gas contract has increased, consumers 
will not immediately feel the effect because rates were set by the 
regulators before the new contract was signed.  Under Latvia's 
complicated system for setting retail prices for gas, which is tied 
to the price of heavy fuel oils, for the first few months of 2007 
the retail price of natural gas will go down by about 3.5 percent 
for domestic consumers and 4-5 percent for industrial users.  Now 
that the delivery contracts are signed, LG can apply to the 
regulators for an increase in retail prices, but any increase is not 
likely to be approved before the end of winter.  Combined with 
unusually mild temperatures to date, the effect on the average 
consumer of higher gas prices is unlikely to be felt until much 
later in 2007. 
 
Antweiler