EU closes Gazprom case

EU closes Gazprom case

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.

"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," Commissioner in charge of competition policy Margrethe Vestager said.

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 FT reported.

In 2012, the European Commission announced an anti-trust investigation into Gazprom's activities. This was based on "concerns that Gazprom may be abusing its dominant market position in upstream gas supply markets."

The executive vice-president of NewTech Services, professor of the Gubkin Russian State University of Oil and Gas, Valery Bessel, speaking with Vestnik Kavkaza, noted that the closure of this case will facilitate Gazprom's work in Europe. "Gazprom has colossal prospects on the European market, including because the production of European gas is declining, primarily in Norway and the United Kingdom, while US statements on LNG supplies are not serious yet. The value of European goods is growing due to the fact that energy is becoming more expensive, and the only way for European companies to compete in the market is to have cheap energy. But cheap energy is only possible with the supply of Russian pipeline gas, and now we see that Europe has finally started to go to meet Gazprom halfway," he said.

At the same time, not all Gazprom's European problems are solved. "Gazprom does not have access to European distribution networks, and instead of selling gas to end users, it sells it to German, French and international companies that make huge money on it. Our gas costs $300 per 1,000 cubic meters, while mediators resell it at a retail price of 1000 euros per 1,000 cubic meters. Our presence in this market is good, we have all the necessary infrastructure, and new pipelines will repay their own costs very quickly. In the future, after commissioning LNG plants, we will be able to supply LNG to Europe," Valery Bessel noted.

Deputy director of energy policy of the Institute of Energy and Finances, Alexey Belogoriev, said that closure of the case creates a more positive background for further negotiations on key Gazprom projects, primarily on Nord Stream-2. "It was obvious already a year ago that they will take such a decision, it was rather surprising that the European Commission did not publish it  for a long time, a significant delay was associated with political tensions within the European Commission. It is good that the EC announced the decision now - it can be a positive signal from the European Commission to both Gazprom and other project participants that it does not attempt to block its implementation" he said.

Alexey Belgoriev also pointed to a big number of Gazprom's problems in Europe. "The number of economic and institutional problems with the EU have declined because Gazprom revised all its contracts with European consumers since 2009 and significantly brought them closer to the requirements of both consumers and the Third Energy Package. Therefore, the European Commission was able to take a decision on antimonopoly case without fines. In this sense it does not have many problems with claims of the representatives of contracts, especially since everyone is satisfied with the price situation. But in political terms the state of affairs for Gazprom is difficult," the expert said.

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