Brussels seeks input on Gazprom proposals as antitrust probe winds down

Gazprom is inching closer to resolving its European antitrust case without a fine, as Brussels seeks comment on the gas giant’s proposals to create a more competitive Central and Eastern European gas market.

Competition commissioner Margrethe Vestager, said: “We believe that Gazprom’s commitments will enable the free flow of gas in Central and Eastern Europe at competitive prices.”

Brussels launched the antitrust investigation, among its largest, with dawn raids in 2011 and focused on Russian company’s alleged anti-competitive behavior in Bulgaria, the Czech Republic, Estonia, Latvia, Lithuania, Poland, Hungary and Slovakia.

The legally complex case is also heavy with politics. The decision to pursue a settlement is an important strategic choice made by Ms Vestager. She said the commission is seeking a “forward-looking solution” that works to secure a more competitive gas market in CEE rather than a fine for past behavior.

Should the commission accept the offer, Gazprom would escape fines, an outcome that may upset CEE countries and Baltic states that have campaigned for a tough line in what is seen as a landmark case for newer member states.

Concern focused on three areas: contractual restrictions on cross-border gas sales, the pricing of gas and contract terms that linked infrastructure spending with gas supply.

Gazprom has offered specific remedies for each concern. It has promised to remove all contractual barriers to sales between the countries and actively facilitate better gas market integration in Bulgaria and the Baltic states. Gas prices will be linked to competitive benchmarks – such as western European hub prices – with quicker and more frequent prices reviews.

Gazprom also offered not to seek damages from Bulgarian partners for the cancellation of the South Stream pipeline. However, no proposal was made regarding the Yamal pipeline, as the agreements are between the Russian and Polish state and therefore are not covered by competition law.

The commission will allow seven weeks for comment, nearly twice the usual time. Mrs Vestager will review the responses in early May and then decide if the promises sufficiently mitigate her concerns. If accepted, the pledges become legally binding, and Brussels could fine Gazprom up to 10 per cent of its global turnover if it breaks the promises.

That’s not an empty threat, as the commissioner fined Microsoft €561m in 2013 for breaching its web-browser commitments.

Gazprom is keen to resolve the issue quickly and quietly, as it fights multiple fires in Brussels stemming largely from eastern states’ objections that it has too much market influence.

Gazprom’s deputy chairman of the management committee Alexander Medvedev said in a statement:

“Our settlement proposal follows a series of consultations between the EU, the Russian Federation and Gazprom launched in 2013. Over the past years, we’ve had many productive discussions with the European Commission during which the parties had a chance to discuss in detail all the concerns raised by the Commission.

The commitments provided by Gazprom – which are a result of substantial work – demonstrate our willingness to address within the established procedure the relevant concerns of the European Commission related to the gas market issues. We hope that the Commission – and ultimately the markets- will respond positively to our proposal which should allow moving the procedure forward and closing the case in the near future.”