GAZPROM'S EUROPEAN OBLIGATIONS
FT - Russia's Gazprom has settled its seven-year antitrust case with Brussels, avoiding a fine by promising reforms that European officials hope will make the central and eastern European gas market more competitive.
Margrethe Vestager, EU competition commissioner said: "Today's decision removes obstacles created by Gazprom, which stand in the way of the free flow of gas in central and eastern Europe. But more than that — our decision provides a tailor-made rule book for Gazprom's future conduct."
The European Commission probe concerned the gas group's alleged abuse of its dominance in the gas markets in Bulgaria, the Czech Republic, Estonia, Latvia, Lithuania, Poland, Hungary and Slovakia, which rely heavily on the company to meet their energy needs.
The case was seen by some CEE countries as a test of the enforcer's resolve to defend eastern markets as stridently as western ones and some will be disappointed that Gazprom will not be fined for its past behaviour — particularly in the light of the big penalties Ms Vestager levied on Google and Qualcomm fines of €2.4bn and €997m, respectively, in other abuse-of-dominance cases where no negotiated settlement was reached.
However rather than levy a fine to punish past behaviour, the commission chose to shape a legally binding solution that would resolve the issues for the next eight years.
"The case doesn't stop with today's decision — rather it is the enforcement of the Gazprom obligations that starts today," said Ms Vestager who can fine the state-owned gas giant up to 10 per cent of the annual turnover if it breaks any of its promises.
By settling, Gazprom has acknowledged EU jurisdiction of its contracts with member states and has committed to:
- remove contractual barriers to the sale of gas across borders and give control of Bulgarian gas transmission infrastructure to the domestic operator;
- virtually connect the isolated gas markets of Bulgaria, Estonia, Latvia and Lithuania by allowing Hungary, Poland, Slovakia, Bulgaria and the Baltic States to choose to have their gas delivered to one of these other countries;
- link prices for Bulgaria, Estonia, Latvia, Lithuania and Poland to the benchmark prices in western European hubs and promised EU-based arbitration within 120 days to resolve price disputes;
- not seek any damages from its Bulgarian partners for the termination of the South Stream pipeline project.
Gazprom's deputy chairman Alexander Medvedev said the company was "satisfied with the commitments decision" and was "always committed to co-operate in good faith in order to find a constructive, mutually acceptable solution".
Mr Medvedev added "We believe that today's decision is the most reasonable outcome for the well-functioning of the entire European gas market".
The settlement comes as tension between the west and Moscow remains high following the alleged chemical attack on former Russian intelligence agent Sergei Skripal in the UK in March, the spate of diplomatic expulsions that followed and allegations of Russian interference in the 2016 US presidential election.
However, Ms Vestager stressed the case was "not about the flag of the company" but rather achieving an outcome that best serves European consumers and businesses.
Gazprom's exports to Europe have soared over the past few years to a record 193.9bn cubic metres last year, accounting for close to 40 per cent of the continent's gas supply.
The EU hopes to cut Russian gas imports in the long term by increasing the bloc's renewable energy supplies, improving energy efficiency, and connecting other gas supplies through liquefied natural gas terminals and other pipelines such as the Trans Adriatic Pipeline. However, Russian gas is expected to remain an important part of the bloc's energy mix.
Conversely, Gazprom forecasts the bloc will need more gas in the future, to compensate for falling domestic gas production and is therefore proceeding with controversial plans to build Nord Stream 2, its second pipeline under the Baltic Sea to Germany, in order to meet that higher future demand.
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