February 4, 2013

VILNIUS, Lithuania — 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.

“To the Soviets, it was easier to build new towns and concrete multi-story houses with thin walls and then heat them without counting energy costs. Gas and oil was free those days, but now it’s simply outrageous,” said Vytautas Stasiunas, head of the Lithuanian District Heating Association.

Nearly all of Lithuania’s leaders have vowed to invest hundreds of millions of dollars in energy-saving housing renovations – promises that have gone unfulfilled.

“There are dozens of awful mistakes made in the energy sector by each and every cabinet since independence. These mistakes are affecting everybody in this country,” Stasiunas said.

Not surprisingly, Lithuanians – who have one of the lowest personal income levels in the 27-member EU – aren’t waiting around and are searching for alternatives.

Vytas Ratkevicius, who lives in Uzupis, a cobblestoned neighborhood in downtown Vilnius, recently switched off his central heating. “We decided to install wood-burning equipment after the sharp increase in gas prices. It’s obvious that gas prices will continue to go up, and we’re simply not ready to pay for this,” he said.

Ratkevicius purchases his wood from Nerijus Pienelis, who says that demand is growing every year. “It used to be remaining farms and villages where people used my production,” he said. “Now most of the wood goes to the national capital, where even rich people burn it.”

Likewise, Ivan Soloduchin, owner of small heating solutions company in Vilnius, says he can’t keep up with orders to help people shut down gas boilers and replace them with firewood boilers or heat pumps. Heating a private home of up to 100 square meters (1,070 square feet) requires up to 20 cubic meters of birch wood. That comes to less than 2,300 litas ($880) for a five-month heating season. Natural-gas users in the same size property would pay up to $500 during a particularly cold month.

“I’m getting up to 10 orders per week, and clients keep on coming even in the middle of winter,” Soloduchin said. “Ten years ago owners of new houses wouldn’t even look my way since firewood was considered dirty and old fashioned – everyone wanted gas boilers. Now things have changed.”