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EU charges Russia’s Gazprom, alleging price gouging

Alexander Nemenov, AFP | Alexeï Miller, CEO of Russian energy giant Gazprom
Text by: NEWS WIRES
4 min

The European Union launched a legal attack on Gazprom on Wednesday, stoking tensions with Moscow as it accused the Russian gas giant of overcharging buyers in Eastern Europe and hindering competition.

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European Commission antitrust chief Margrethe Vestager said Gazprom was barring EU clients from selling its gas to other states -- a particular concern in recent efforts to aid Ukraine -- and pressuring governments to back its pipeline interests.

The Kremlin said it hoped a compromise would be found and added Russia and the company would defend their interests.

"We hope that a compromise will be found," Kremlin spokesman Dmitry Peskov told journalists on a conference call. "We are looking forward to an absolutely impartial attitude towards the Gazprom company. Of course, Gazprom will defend its interests and the state, as a major shareholder in the company, will also defend the interests of Gazprom."

State-controlled Gazprom is a vital supplier of energy to Europe despite the EU’s frequent political disputes with Moscow.

The Commission’s investigation, opened in September 2012, had initially covered Poland, the Czech Republic, Slovakia, Hungary, Bulgaria, Estonia, Latvia and Lithuania.

Relations with Russia, and Gazprom in particular, have since been poisoned more by the East-West confrontation over Ukraine.

“Gazprom is dominant in all these markets,” EU Competition Commissioner Vestager told a news conference. “Our preliminary view alleges that Gazprom is abusing this position.”

“Gazprom has been able to charge higher prices in some countries without fearing that ... gas would flow in from where prices were lower,” she said of contracts with the three ex-Soviet Baltic states and formerly communist Poland and Bulgaria.

Vestager said prices in some countries were as much as 40 percent higher than in others.

Lithuanian President Dalia Grybauskaite welcomed the charges, saying: “The era of Kremlin-backed political and economic blackmail draws to a close.”

Noting the investigation had begun before Russia annexed Crimea from Ukraine, Vestager said “this case is not political” but acknowledged some would see political elements in it.

Gazprom responded by calling the charges, to which it has 12 weeks to respond, “unfounded” and saying it expected a resolution within the framework of previous undertakings between the Kremlin and Brussels “on the intergovernmental level”.

The EU has brokered deals to keep gas flowing to Ukraine despite the conflict between Kiev and Moscow, but efforts to supply gas via eastern EU states have been hindered by contracts with Gazprom that prohibit the re-export of Russian gas.

Gazprom had also pressured Poland and Bulgaria into accepting unfavourable terms over gas pipeline control and construction, the commissioner said.

The decision to move against Gazprom comes a week after Vestager charged U.S. tech giant Google with abusing its market power, following five years of hesitation by her predecessor. She said, however, that in other cases she would be willing to negotiate with firms without pressing charges.

The Dane has appeared determined to challenge big corporate powers since taking on the powerful post in November, regardless of past offers of compromise from both Google and Gazprom.

Despite insisting she would look only at the legal merits of a case that focuses on Gazprom’s pricing policies for different customers, the accusations will not ease frictions with Moscow over Ukraine in which gas supplies have played a major role.

Gazprom offered concessions to Vestager’s predecessor last year in a bid to settle the case and avoid a possible fine but talks failed over its refusal to cut prices in eastern Europe.

The Russian behemoth, with annual sales of some $100 billion, supplies about 30 percent of the 28-nation EU’s natural gas. It has been under investigation since September 2012, including for hampering the flow of gas across Europe.

Vestager can order companies to change their business practices and is theoretically able to levy fines of up to 10 percent of their annual global turnover.

(REUTERS)

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