EU charges Gazprom with market abuse

Image source, Reuters

The European Commission (EC) has charged Gazprom with abusing its dominant market position in Central and Eastern European gas markets.

The Commission said its preliminary view was that the Russian energy giant was breaking EU anti-trust rules.

It added Gazprom may have limited its customers' ability to resell gas, potentially allowing it to charge unfair prices in some EU member states.

Gazprom rejected the Commission's objections, calling them "unfounded".

"Gazprom strictly adheres to all the norms of international law and national legislation in the countries where the Gazprom Group conducts business," the company said in a statement.

It now has 12 weeks to respond to the Commission's allegations.

The move could further sour relations with Moscow, which are already strained over the Ukraine crisis.

Brussels began investigating state-controlled Gazprom three years ago, but Moscow says the Commission's allegations are politically motivated.

The EU's new anti-monopoly chief, Margrethe Vestager, said the Commission had found that Gazprom "may have built artificial barriers preventing gas from flowing from certain Central European countries to others, hindering cross-border competition.

Analysis: Theo Leggett, business reporter, BBC News

Although relations between the EU and Russia are deeply strained at the moment, because of events in Ukraine and the sanctions regime, Europe remains highly reliant on Russian gas. About a third of the region's imports come from Russia - and in a number of central and eastern European countries, the figure is nearer 100%.

Unlike western European nations, they are not able to diversify their supplies, by using imports from Norway, or liquid natural gas from Algeria, for example. This means state-controlled Gazprom has significant influence.

The Commission believes the company has used this situation to its advantage - bumping up prices in Poland, Bulgaria, Estonia, Latvia and Lithuania. It also believes that contracts which prevent wholesalers from reselling gas across borders have allowed this situation to continue.

Gazprom now has 12 weeks to respond to the Commission's concerns. It has already indicated that it believes the solution lies with an agreement between the European Commission and the Russian government itself.

"Keeping national gas markets separate also allowed Gazprom to charge prices that we, at this stage, consider to be unfair.

"If our concerns were confirmed, Gazprom would have to face the legal consequences of its behaviour."

Brussels' competition authority has the power to impose fines of up to 10% of Gazprom's global turnover.

The Commission questioned the formulae the energy giant used to come up with the different prices at which it sold gas to individual countries.

"Gazprom's specific price formulae, which link the price of gas to the price of oil products, seem to have largely favoured Gazprom over its customers," it said.

The Commission said that, in its preliminary view, Gazprom was hindering competition in the gas markets in eight Central and Eastern European member states - Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland and Slovakia.

Russia supplies about a third of the EU's gas requirements, with half that amount going through pipelines that cross Ukraine.