Gazprom accused of imposing monopoly contracts

The European Commission has formally charged Russian gas giant Gazprom with violating antitrust laws.

This was announced at a specially convened press conference by the European Commissioner for Competition Margrethe Vestager.

According to the decision agreed upon by all EU leaders, Gazprom is accused of impeding free competition in the region and inflating prices for its Eastern European consumers, in particular Poland, Hungary and six other countries in the region.

“We found that it [Gazprom] could create artificial barriers to the free flow of gas through certain central European countries, which prevented free competition,” Vestager said on Wednesday.

As the Commissioner for Competition said, Gazprom's behavior in the countries of Eastern and Central Europe, where the company almost completely controlled the gas market, amounted to abuse of its dominant position.

In accordance with the procedure, Gazprom has 12 weeks to respond.

As BBC economics commentator Theo Leggett notes, the European Commission says it is not motivated by political motives, but if it wants to reduce Gazprom's role in the gas market, it will thereby reduce Moscow's influence on the continent.

“The claims are unfounded”

Gazprom almost immediately issued a response statement that it considered the claims made by the European Commission to be unfounded.

“At the same time, the adoption by the European Commission of a “statement of objections” is only one of the stages of the ongoing antimonopoly investigation and does not mean that Gazprom is guilty of any violation of EU antimonopoly legislation,” the statement says.

“OJSC Gazprom strictly adheres to compliance with all norms of international law and legislation in the countries where the Gazprom Group operates. The work of the Gazprom Group in the EU market, including the applied gas pricing principles, complies with the standards used by other gas producers and exporters,” notes the company’s press service.

The European Commission’s decision was made two and a half years after Brussels launched a trial on a number of charges against the Russian gas giant, in particular regarding pricing for Russian gas in Eastern Europe, and a week after the US corporation was charged with violating competition by promoting company own products.

If Russia considers the decision made on Wednesday to be politically motivated, then observers believe that Vestager has in response to this an indication of a similar antitrust case against Google.

"Retrospective Measures"

Certainly, the end of this investigation came at a difficult time for relations between Russia and the EU, and now, perhaps, a rather tough response from Moscow will follow, says BBC correspondent in Brussels Chris Morris.

At the same time, European diplomats emphasize that political tensions between the Kremlin and Brussels did not influence the indictment against Gazprom.

Russian Foreign Minister Sergei Lavrov said Gazprom's agreements with European firms were consistent with the legal regime that existed in the EU at the time they were concluded, and called the European Commission's claims an unacceptable attempt to fit previous contracts into a third energy package.

“All contracts that are currently in force, which were concluded by Gazprom with its partners, were concluded in full accordance with the legal regime that was in force in the EU at that time,” the minister said.

“Rules are written to record the achieved level of development of a certain industry. I am convinced that the third energy package is quite suitable for developing new projects, but it cannot retrospectively affect what was created in the absence of these new rules,” said Sergei Lavrov.

Express analysis: another confrontation between Brussels and Moscow

Despite the fact that, due to the situation in Ukraine and the sanctions imposed against Moscow, relations between the EU and Russia are now very strained, Europe continues to be largely dependent on Russian gas supplies - approximately a third of all gas imports go to the Old Continent from the Russian Federation, notes Economic BBC columnist Theo Leggett.

Moreover, some countries of Central and Eastern Europe depend on Russian supplies almost 100% - unlike Western European countries, they are not able to diversify their sources of blue fuel by purchasing it, say, from Norway or in the form of liquefied gas from Algeria. Because of this, state-controlled Gazprom has significant influence in the region.

The European Commission believes that the Russian company took advantage of the situation for its own benefit by inflating prices in Poland, Bulgaria, Estonia, Latvia and Lithuania. According to the European agency, the situation was aggravated by the fact that, due to the conditions laid down in the contracts concluded with Gazprom, other companies could not resell gas.

Gazprom has 12 weeks to respond. The company has already made it clear that the problem can be resolved through negotiations between the European Commission and the Russian government.

The European Commission claims that it was not motivated by political motives. However, any solution reached during the negotiations will imply the involvement of the Russian authorities in the situation. If the European Commission wants to reduce Gazprom's role in the gas market, it will thereby reduce Moscow's influence on the continent.

Ultimately, Europe needs gas, and Russia, which is experiencing increasing financial difficulties, needs to sell it. This situation will not change, but any changes in the formula for selling and buying gas may push Brussels and Moscow.

Whether the European Commission recognizes this or not, such a confrontation can turn into another front of political interest struggle, which has recently characterized relations between Europe and Russia.