EU Accuses Gazprom of Abuse

April 22, 2015Political Economyby EW News Desk Team

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The European Union has accused Russian gas giant Gazprom of anticompetitive practices as the EU issues formal charges against the firm.

In a further sign of intensifying tension between the EU and Russia, the EU said it would pursue charges that Gazprom has acted illegally according to EU rules.

In a press release, the EU said that the European Commission sees Gazprom breaking competition rules in order to fragment gas markets in Central and Eastern Europe, enabling Gazprom “to charge unfair prices in certain Member States.”

Additionally, EU Commissioner Margrethe Vestager said the Russian company has been abusive, using Russia’s influence over eastern nations to strong-arm countries into unfair contracts. "I am concerned that Gazprom is breaking EU antitrust rules by abusing its dominant position on EU gas markets. We find that it may have built artificial barriers preventing gas from flowing from certain Central Eastern European countries to others, hindering cross-border competition. Keeping national gas markets separate also allowed Gazprom to charge prices that we at this stage consider to be unfair,” she said.

The EU’s goals in pursuing this case are unclear, but Vestager suggests that a legal ruling against Gazprom is in order. "If our concerns were confirmed, Gazprom would have to face the legal consequences of its behaviour,” she said.

Territorial Restrictions, Unfair Pricing

Amongst the illegal practices that Gazprom is accused of, the EU has complained of the firm imposing “territorial restrictions in its supply agreements with wholesalers,” limiting resellers’ profitability in selling energy throughout the EU. This has “prevented the cross-border flow of gas,” causing price volatility and uncertain energy supplies for many Europeans.

Additionally, the view of Gazprom’s pricing policy is “unfair” as practiced in Bulgaria, Estonia, Latvia, Lithuania, and Poland. The EU accuses the gas giant of “charging prices to wholesalers that are significantly higher compared to Gazprom’s costs or to benchmark prices.” Additionally, the European Commission contends that Gazprom has forced Bulgaria and Poland to agree to unrelated contracts by blackmailing the countries with its large market position.

The EC first investigated Gazprom in August 2012 in accordance with EU legislation, which limits companies’ abilities to charge certain prices to partners and to use its market position in influencing contracts.

The legislation is rarely enforced, but most recently, Google came into the EC’s crosshairs with accusations of unfair competition by forcing web traffic to its own sites and not to other sites.

Gazprom has not yet publicly commented on the accusations. The EU has told the firm that they must reply within twelve weeks. While some commentators argue that the investigation and accusation are politically motivated, others believe Russia has indeed used Gazprom to control and force Eastern European nations to make certain decisions and go into agreements that benefit Russia.

Gazprom shares lost over 2% of their value in trading on the news.