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29/07/2016

Commission opens antitrust case against Gazprom

Energy

Commission opens antitrust case against Gazprom

Gzprom3.jpg

The European Commission is investigating the Russian energy giant Gazprom for allegedly hindering competition in Central and Eastern European gas markets, in breach of EU antitrust rules. 

The formal proceedings will investigate the Russian gas export monopoly, which provides 36% of Europe's gas imports.

“The Commission has concerns that Gazprom may be abusing its dominant market position in upstream gas supply markets in Central and Eastern European member states, in breach of Article 102 of the Treaty on the Functioning of the European Union,” the EU executive said in a statement yesterday (4 September).

The Commission said it will treat the case as “a matter of priority” but there is no deadline to complete the enquiry.

The investigation will focus on three suspected anti-competitive practices in Central and Eastern Europe, the EU executive said:

  • First, Gazprom may have divided European gas markets by hindering the free flow of gas across member states.
  • Second, it may have prevented the diversification of gas supply.
  • Thirdly, it may have imposed unfair prices on its customers by linking the price of gas to oil prices.

"Such behaviour, if established, may constitute a restriction of competition and lead to higher prices and deterioration of security of supply. Ultimately, such behaviour would harm EU consumers," the EU executive said in the statement.

Gazprom responded to the Commission's allegations by saying “Let them investigate”, the BBC reported. 

In September 2011, EU officials raided Gazprom's offices in another anti-trust probe. The raids were launched in Central and Eastern European states to investigate firms involved in the supply, transmission and storage of natural gas.

Gazprom sells its gas with considerable price differences. According to Russian government policy, gas in Russia is sold at a subsidised price, basically at loss. The company's profits come mainly from European customers, from which Gazprom gets about 60% of its revenue.

In many cases, it is obvious that Russia sells its gas at a political price. Belarus, a country with closer relations to Moscow, pays $100 (€76) per 1,000 cubic metres, while Ukraine, another former Soviet republic, pays $416 (€314) per thousand cubic metres. Ukraine is trying to negotiate a fairer price at $250 (€189).

Gazprom is Russia's biggest company and the world's largest gas producer. 

Background

Gazprom is suspected to be in breach of Article 102 TFEU, which prohibits the abuse of a dominant position which may affect trade between member states.

The implementation of this provision is defined in the Antitrust Regulation (Council Regulation No 1/2003), which can be applied by the Commission and by the national competition authorities of EU member states.

Gazprom delivers gas to 25 EU countries, the exceptions being Spain and Portugal. The vast majority of contracts to Europe are 20-25-year contracts.

Further Reading

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