Gazprom settlement expected

Gas giant faces €10bn fine for blocking rivals.

Gazprom, the Russian state-owned gas giant, is expected to present a proposal to the European Commission this week to settle a year-long anti-trust investigation into its activities in central and eastern Europe, Joaquin Almunia, the European commissioner for competition, said on Monday (9 December).

Gazprom faces a fine of up to €10 billion for allegedly blocking rival gas suppliers in the European Union’s central and eastern member states, and for overcharging customers by linking its gas price to the price of oil. But the EU has not yet formally charged Gazprom, and has issued only a warning.

Once the Commission receives the proposed remedy, it will seek feedback from interested parties before deciding whether to accept the offer. The proposal to settle would come just a week after the Commission announced that it is challenging six bilateral agreements conducted between member states and Gazprom for construction of the South Stream gas pipeline. The Commission says the agreements violate EU law.

The agreements were struck between Gazprom and Bulgaria, Hungary, Greece, Slovenia, Croatia and Austria, as well as with Serbia. Günther Oettinger, Commissioner responsible for energy, has sent a letter to Russian energy minister Alexander Novak informing him of the Commission’s finding.

The Commission says the bilateral deals must adhere to the EU’s third energy package, even though some of them were signed before that package was adopted. What counts, the Commission says, is that the pipelines would be built after the package took effect.

Three problems

The deals violate the package in three ways: Gazprom, as a state-owned gas company, cannot both manage the pipelines and provide the gas; Gazprom cannot be the only one using the pipelines; and the tariff structure is unfair. A diplomatic source said that the member states in question have been aware of the Commission’s findings for some time.

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The Commission said that, while it cannot stop construction of the pipelines, it can block the authorisation needed for transporting gas. The Commission will consider opening infringement proceedings if the contracts have not been renegotiated by that point.

Bulgaria and Serbia have already started construction of parts of the pipeline after ceremonial openings. The project envisages gas being piped across the Black Sea to Bulgaria, and then onward to the other six countries. First commercial deliveries are scheduled to begin in 2015.

In a statement, Gazprom said the company is “surprised and disappointed that the Commission voices its concerns only now, after construction works have begun”. It added: “The construction of South Stream will proceed as scheduled and in full compliance with local laws and international standards. Remaining regulatory questions concerning the application of EU energy law can be clarified in parallel.”