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Poland obtains major price cut on Russian gas imports, ending legal dispute

Poland has obtained a significant price reduction on the gas it imports from Russia, ending a legal dispute that had escalated to international arbitration, officials said Tuesday.

The head of Poland's PGNiG gas an oil giant, Grazyna Piotrowska-Oliwa, said her company and Russian supplier Gazprom signed a deal in Warsaw on Monday that "changed the pricing formula" of their 2010 agreement by linking the cost of the gas to market prices.

That cuts the price of about $550 per 1,000 cubic meters by over 15 percent, effective immediately, said Treasury Minister Mikolaj Budzanowski. That saves the government some $1 billion annually and brings Poland's prices close to those paid by Germany, he added.

Poland imports almost 70 percent of its gas and 90 percent of its crude oil from Russia. The country, which has since the Cold War been trying to distance itself from Russia, is uncomfortable with that level of dependence, particularly since Moscow has in the past used its control of gas supplies as a bargaining chip in international political issues.

As a result, Poland has been searching for alternative forms of energy — it is exploring for shale gas and pursuing plans for nuclear energy. However, it will not be clear for another two or three years whether shale gas is economically viable. A nuclear power plant, meanwhile, would not be operational before 2024.

As a result of Tuesday's deal, Piotrowska-Oliwa said gas prices for Polish consumers, including households, will be reduced as of Jan. 1, but declined to say by how much.

She added that Poland is withdrawing a complaint against Gazprom it had lodged with the Stockholm Arbitration Tribunal. Gazprom said in Moscow it was also withdrawing its part of the case from the tribunal.

Gazprom's deputy head, Alexander Medvedev, who signed the agreement, said that the two sides have "found a mutually acceptable mechanism of correcting prices for Russian gas that would give us flexibility in reacting to the recent changes in the gas markets in Poland and Europe."