Brussels accuses Gazprom of unfair pricing of gas in eastern Europe

European Flag

Europe’s anti-trust regulator has accused Russia’s massive gas monopoly, Gazprom, of unfair pricing practices in Moscow’s former satellite states of eastern Europe, launching a legal dispute that could result in multibillion-euro fines for the Kremlin’s giant energy company.

The “statement of objections ” issued by the European commissioner for competition, Margrethe Vestager of Denmark, on Wednesday accuses the world’s biggest gas producer of charging eight EU member states in eastern Europe up to 40% more for their gas than elsewhere in the EU. The company manipulated contracts and included clauses barring clients from exporting gas more cheaply in the EU, according to the commission.

It marks the second time in a week that Brussels has unveiled charges against globally dominant corporations. Last week Vestager issued charges against Google because of the search engine’s alleged manipulation of its market dominance to lure browsers towards its shopping services.

Vestager said that despite the accusations of overcharging in eight countries the investigation focused on five: the three Baltic states of Estonia, Latvia and Lithuania, plus Poland and Bulgaria. The Baltic states in particular are almost entirely dependent on natural gas from Gazprom. The other three countries named were Hungary, Slovakia and the Czech Republic.

“Gazprom is dominant in all these markets,” said Vestager. “Our preliminary view is that Gazprom is abusing this dominant position.”

Poland and the Baltic states are the EU’s most determined allies in the standoff with Moscow over the Ukraine conflict. By contrast, the three countries omitted from the chargesheet are broadly pro-Russian on the issue of Ukraine and strong opponents of EU sanctions against Russia.

Given the acute tensions between Russia and the European Union, Vestager admitted that many would see the charges against Gazprom aspolitical, not least since half of Russia’s gas supplies to Europe are pumped via Ukraine and that the Kremlin has regularly used energy as a weapon in its disputes with Kiev and more broadly with Europe.

While eastern Europe is almost entirely dependent on Gazprom for its gas, Germany is the corporation’s biggest customer, buying about a third of its gas from the Russians. Vestager said she was not consulting national governments in Europe over the case since that would have the effect of “politicising” it.

Gazprom, which has 12 weeks to respond to the charges, immediately rejected them as unfounded. It appeared to claim special status for its operations in the European Union because it was a Russian state-controlled entity, implying that its operations in the European Union – by far its biggest group of clients – were not subject to EU law.

“We expect it will be duly noted that 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.

Powered by Guardian.co.ukThis article was written by Ian Traynor in Brussels, for theguardian.com on Wednesday 22nd April 2015 19.05 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010

 

JefferiesAnd the Best Place to Work in the global financial markets 2016 is...

Register for Financial Markets News Alerts