EU Charges Gazprom With Abusing Market Position
April 22, 2015
by Rikard Jozwiak
BRUSSELS -- European Union antitrust regulators have charged state-owned Russian gas giant Gazprom with abusing its dominant position in eight Central and Eastern European countries following more than two years of investigation.
European Competition Commissioner Margrethe Vestager said in a statement on April 22, 'We find that it [Gazprom] may have built artificial barriers preventing gas from flowing from certain Central, Eastern European countries to others, hindering cross-border competition.'
In a statement on April 22, Gazprom rejected the EU charges and called them 'unfounded.'
It added that it 'strictly adheres to all the norms of international law and national legislation' in the countries where it operates.
Brussels has been probing three main accusations against Gazprom and found that the company imposes territorial restrictions in Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, and Slovakia that include export bans and clauses requiring the purchased gas to be used in a specific territory.
All of those countries are former Eastern Bloc states that have joined NATO and the European Union since the breakup of the Soviet Union in 1991.
Brussels has also found that Gazprom used other measures to prevent its gas from flowing cross-border, such as obliging wholesalers in these countries to obtain the company's agreement to export gas.
The second EU finding concerns unfair pricing policy in the three Baltic states -- as well as in Poland and Bulgaria -- by linking the price of gas to that of oil.
Vestager pointed out that the practice of oil indexation isn't unlawful but Gazprom's pricing formula in these five countries had 'unduly favored Gazprom over its customers.'
The third objection from Brussels concerns Gazprom's activities in Poland and Bulgaria, in which gas supplies have been made dependent on investments in pipeline projects sponsored by Gazprom or by accepting that the company reinforce its control over a pipeline.
Gazprom's statement said the company expected that its 'rights and legitimate interests, rooted both in EU legislation and international law, will be taken into consideration.'
'We also expect that it will be duly noted that OAO Gazprom was established beyond the jurisdiction of the EU, and that it is empowered by the laws of the Russian Federation with special socially-significant functions and has the status of a strategic government-controlled business entity,' it said.
Gazprom has 12 weeks to respond to the charges against it.
The state-controlled Russian gas giant also has the right to call a hearing with EU competition officials in order to present its defense against the charges.
It also can try to reach a settlement during that period of time, through negotiations with EU officials -- a process that Gazprom has indicated it is willing to do.
If the issue is left unresolved, the EU Commission can levy fines of up to 10 percent of Gazprom's overall sales, or order changes in the company's business practices.
The charges could stoke further tensions between the West and Russia, with relations already at a low ebb as a result of Moscow's support for pro-Russian separatists in eastern Ukraine and its illegal annexation of Ukraine's Crimean Peninsula.
The EU has sanctioned dozens of Russian individuals and entities in response to the Kremlin's role in Ukraine's conflict.
EU sources say the European Commission had the charges ready one year ago but delayed moving forward with them due to concerns about aggravating ties already strained over the Ukraine crisis.
EU diplomats told RFE/RL that the announcement of charges against Gazprom were also delayed in late 2014 because of the EU's dependence on Gazprom's supplies for the winter.
Gazprom supplies up to one-third of the European Union's total supply of natural gas.
The EU purchased about 125 billion cubic meters of gas from Gazprom in 2014, with half those supplies being sent through pipelines that cross Ukraine.
In Kyiv, Ukraine's state gas company, Naftogaz, welcomed the European Commission's move, calling it 'an important step in safeguarding European energy security.'
A statement from Naftogaz on April 22 said it had 'for years faced the detrimental effects of Gazprom's dominant position in both EU and Ukrainian markets.'
It also said: 'At present, Gazprom is refusing to provide Naftogaz with shipping code pairs, which prevents the signing and implementation of interconnection agreements' that comply with EU energy regulations and that would allow reverse flows of gas pipeline deliveries 'between Slovakia, Hungary, Poland, and Romania on the one hand and Ukraine on the other.'
Commission sources told RFE/RL that Vestager's announcement last week of anticompetition charges against the U.S.-based Internet giant Google showed that the EU's investigations are not politically motivated and did not 'single out' Gazprom.
Vestager was keen to point out on April 22 that the charges against Gazprom are a competition case and not a political one.
With additional reporting by Reuters and TASS
Copyright (c) 2015. RFE/RL, Inc. Reprinted with the permission of Radio Free Europe/Radio Liberty, 1201 Connecticut Ave., N.W. Washington DC 20036.
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