The European Commission has accused Gazprom of imposing unfair gas prices in five EU member states – Latvia, Lithuania, Estonia, Bulgaria and Poland – through abuse of its dominant market position. This constitutes a breach of EU anti-trust rules.
The Commission has sent a “Statement of Objections” to the Russian gas giant, EU Commissioner for Competition, Margrethe Vestager, announced on 22 April. Gazprom has 12 weeks to reply. It can also propose an oral hearing to present its case.
In an immediate reaction, the Russian company called the allegations “unfounded”. “The business practices of the Gazprom Group in the EU market, including the principles of gas pricing, are in full conformity with the standards observed by other producers and exporters of natural gas,” it said in a press release.
This is not what the EU’s investigation concludes. “The Commission’s preliminary view is that Gazprom is abusing its dominant position,” Vestager told journalists. “Gazprom has adopted a strategy to partition the EU single market by applying territorial restrictions in its contracts.”
The territorial restrictions include gas export bans (countries cannot re-export to other member states) and destination clauses (gas must be used in a specific territory). They mean that Gazprom is stifling competition in eight countries – Latvia, Lithuania, Estonia, Bulgaria, Poland, Slovakia, Hungary and the Czech Republic – the Commission says.
In five of these – Latvia, Lithuania, Estonia, Bulgaria and Poland – this lets Gazprom charge “unfairly high prices” (up to 40% higher than elsewhere), the Commission continues. Here, the gas price is linked to the oil price. “It’s not the oil indexation as such that we consider illegal,” explained Vestager, “but the way oil indexation was used contributed to unfair pricing.”
In addition, Gazprom has used its dominant position to obtain “unrelated commitments” on gas infrastructure, especially in Bulgaria (the now-abandoned South Stream pipeline) and Poland (the Yamal pipeline), the Commission says.
Vestager explained that these findings do not come out of the blue: the Commission started on-site inspections in September 2011 and it opened formal anti-trust proceedings against Gazprom in August 2012. The two parties then tried – and failed – to settle the matter in late 2013 and early 2014. When asked about that today, Vestager says to “let bygones be bygones”.
Both Vestager and Gazprom stressed that sending the Statement of Objections is just one more step in the (time-unlimited) anti-trust process. Vestager refused to speculate on what the Commission expects from Gazprom. “All roads are open,” she said, then added: “We want contracts that support an open market.”
Vestager was also at pains to stress that while this will be seen as an extremely political case, it is to her a competition case based on “facts and evidence”. She cited several similar investigations, including a current one into Bulgarian Energy Holding and previously, European utilities EDF and Enel.
Nevertheless, Gazprom said in its press release that the company has the status of a “strategic government-controlled entity” and expects to find a solution on the “intergovernmental level”.
Vestager expects an amicable solution with a “very professional, very large, very impressive company doing good business in Europe”. She added: “I hear no other wish than the wish to abide by European regulation.” Indeed, Gazprom’s CEO Alexei Miller said in a speech in Berlin on 13 April: “We will abide by the rules of the European market.”
The alternative at the end of what could be a very long road is that Gazprom faces a fine up to 10% of its global turnover.
Gazprom CEO Alexei Miller’s speech on 13 April 2015 in Berlin: (in Russian with English translation)