Gazprom to fight EU market abuse claims

Gazprom has declared it will fight a European Commission (EC) inquiry into possible dominant position abuses, even though the Russian position could be weak, writes Sara Lewis. The EC sent Gazprom a ‘Statement of Objections’ on 22 April, accusing the Russian energy giant of abusing its dominant position in central and eastern European gas markets – a charge the company denies. Gazprom now has 12 weeks to respond and can request an oral hearing to put its case. However, the EC has no legal deadline to complete its inquiries, so it is uncertain when the final ruling will emerge, which could involve huge fines of millions of euros.

Mikhail Korchemkin, Executive Director of the US-based East European Gas Analysis, told Petroleum Review that he thinks the EC has a strong case and that there was clear evidence ‘definitely, about [Gazprom] preventing free flow and free competition’. Korchemkin outlined numerous cases where Gazprom was guilty of abusing its market position – for instance, impeding the Baltic States from securing reverse flow gas supplies. Furthermore, ‘the price is unclear’ with respect to Gazprom charging, he adds. 

Following an initial probe in proceedings launched against Gazprom in August 2012, the EC now says its preliminary view is that: ‘Gazprom is breaking EU antitrust rules by pursuing an overall strategy to partition central and eastern European gas markets.’

The EC says it suspects Gazprom has committed market abuse in eight member states – Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland and Slovakia. It adds: ‘Gazprom may also have abused its dominant market position by making the supply of gas dependent on obtaining unrelated commitments from wholesalers concerning gas transport infrastructure.’

EU Competition Commissioner Margrethe Vestager suggests that: ‘[Gazprom] may have built artificial barriers preventing gas from flowing from certain central eastern European countries to others, hindering cross-border competition. Keeping national gas markets separate also allowed Gazprom to charge prices that we at this stage consider to be unfair. If our concerns were confirmed, Gazprom would have to face the legal consequences of its behaviour.’

The state-owned Russian company has already rejected the charges as ‘unsubstantiated’ in a statement, insisting that it ‘strictly adheres to all the rules of international law and legislation in the countries where Gazprom Group operates’. It argues that its operations on the EU market, including gas pricing, ‘meet the standards that are used by other producers and exporters of gas’.

Meanwhile, the Russian Ministry of Energy has accused the EC of ignoring Russia’s arguments and noted that bilateral talks under the Russia-EU Energy Dialogue have been ‘unilaterally suspended by the European Commission on the wave of sanctions’. A Ministry statement said that Russia ‘expects that mutually acceptable constructive solutions to the issue will be found without its politicisation’.

Vestager denies suggestions that the EC’s actions are politically motivated. Speaking in a Brussels press conference at the end of April, she stressed that the case was already opened before the Ukraine crisis soured EU relations with Russia. Vestager argued: ‘This is a competition case. Because this is the way we have investigated and proceeded with the case. And as always it is based on facts, on interpretations of facts and evidence that we have found.’

For more information about oil and gas operations in Russia, Ukraine and the Black Sea, see Petroleum Review’s June 2015 issue. 

Photo: Power of Siberia pipeline under construction

Source: Gazprom