EU Commission files anti-trust charges against Russia's Gazprom

24 April 2015

Following a two-year investigation, the European Commission’s competition branch filed charges on Wednesday against Russia’s biggest energy company Gazprom, citing claims of unfair practices in Central and Eastern Europe.

The gas giant is under investigation for allegedly abusing its market dominance in various EU member states, namely Bulgaria, Estonia, the Czech Republic, Hungary, Lithuania, Latvia, Poland, and Slovakia.

Gazprom is the top gas supplier for these countries, making up at least 50 percent of market share in most, and reaching 100 percent in some instances.

In those countries, Gazprom is accused of implementing a series of territorial restrictions in supply deals with wholesalers that hinder cross-border flows of gas; adopting an unfair pricing policy; and making gas supplies in Bulgaria and Poland conditional on receiving certain infrastructure-related commitments from wholesalers, such as the construction of additional pipeline routes into Europe.

According to a press release outlining its “Statement of Objections,” the European Commission suspects Gazprom of using these policies to divide Central and Eastern European gas markets, essentially maintaining its economic dominance, raising artificial barriers to trade between EU member states, and pushing up market prices.

“Keeping national markets separate also allowed Gazprom to charge prices that we, at this state, consider to be unfair,” said the EU’s competition commissioner, Margrethe Vestager on Wednesday, noting that any companies operating within the 28-nation bloc must comply with EU rules.

The Russian company has 12 weeks to respond to the charges, which it has condemned as “unfounded.” According to quotes reported in the New York Times, Gazprom has argued that – as a state-controlled entity – it falls outside EU antitrust jurisdiction.

If the claims against Gazprom are confirmed, the company could potentially face steep fines, which analysts say could reach into several billions of euros, and may be forced to open its markets to more competition.

There are no legal deadlines for finishing the case, which the Commission says depends on factors such as the investigation’s complexity. No final decisions will be taken before the parties involved have used their rights to defend themselves.

EU-Russia tensions

The recent EU charges are expected to exacerbate tensions between Brussels and Moscow, which have been running high in the several months following the start of the Ukrainian crisis.

The ongoing conflict has brought to the fore energy security concerns for particular EU member states, especially considering that about 30 percent of the EU’s gas comes from Russia, with almost half of this passing through Ukraine.

The EU has negotiated with Russia to ensure gas flow to Ukraine despite the current geopolitical conflict, but Gazprom’s policies against the re-export of Russian gas make it impossible for other eastern EU states to provide gas as aid to their Ukrainian neighbour.

As a result, the EU has advocated for a diversification of gas sources and the exploration of new supply regions for fuels and technologies.

Furthermore, Brussels announced plans last month to establish a single market in energy supplies, purchases, and consumption within the 28-nation EU bloc. (See BioRes, 26 February 2015)

Among the plan’s several objectives is reduced energy dependence on other countries, particularly over continued concerns related to EU energy security given the deteriorating relationship with Russia.

ICTSD reporting; “E.U. Charges Russian Energy Giant Gazprom With Abusing Its Dominance,” THE NEW YORK TIMES, 22 April 2015; “EU charges Russia’s Gazprom, alleging price gouging,” REUTERS, 22 April 2015; “EU charges Gazprom with ‘abusing’ market position in Central & Eastern Europe,” RT, 22 April 2015.

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