By Gederts Gelzis & Alissa de Carbonnel — Some big utilities in eastern Europe are backing a proposed EU antitrust settlement with Russian state gas exporter Gazprom, increasing the chances of a deal that is opposed by countries striving to loosen the Kremlin’s grip over their energy sectors. The provisional agreement, announced last month, would see Gazprom avoid a fine of up to 10 per cent of its global turnover over EU charges it abused its dominant market position and overcharged clients in eight eastern European nations. In return the Kremlin’s gas giant, which denies the charges, has offered concessions on contract terms and pricing to settle one of the EU’s largest, longest-running antitrust cases.
However, the deal is subject to feedback from EU states and market players in the region and could still be amended or even abandoned.
Many of the countries involved — once in the orbit of Moscow and reliant on Gazprom for the bulk of their gas supplies — are disappointed at the EU’s deal-making. They believe Russia has been exploiting their dependence in a region where gas prices can make or break governments and want to see Gazprom punished, EU diplomats said.
“Russia uses the full arsenal of tools to deploy influence: military, economic, political and even cultural,” an EU diplomat said. “Is there a country that doesn’t want this case solved? Probably not... but there is a lot of anger.”
EU antitrust authorities say the case is not political and that the market response will take priority. A settlement would smooth business ties with Russia, which supplies around a third of its gas, despite tensions over Ukraine and Syria.
The agreement has drawn a positive response from some big utilities and network operators which said it would allow them to strike better deals with Gazprom, increasing the likelihood the EU will accept the Russian company’s concessions.
Bowing to EU conditions, Gazprom’s offer would see it do away with contract terms that bar clients from exporting its gas to other countries and tie deals to investments in pipelines.
The company would also link its prices to benchmarks such as European gas market hub prices, rather than oil, and allow clients to renegotiate the prices every two years.
“It (the deal) is a very welcome step if it is made a reality,” the head of Latvia’s public utilities commission, Rolands Irklis, said. “It would give Latvia a direct access to the European markets even if (it) is not directly connected to the infrastructure,” he said.
Aigars Kalvitis, head of gas utility Latvijas Gaze, which is partly owned by Gazprom, said the settlement could help it negotiate more favourable terms for its long-term Russian gas contracts, which expire in 2030.
Slovakian gas utility SPP said Gazprom had already scrapped curbs on cross-border trade and shown more flexibility on pricing in recent years. The pledges could further boost integration on gas markets, a spokesman said, leading to “higher energy security”.
The EU member states where Gazprom has allegedly engaged in anti-competitive behaviour are Poland, Estonia, Latvia, Lithuania, Bulgaria, Hungary, Slovakia and the Czech Republic.
The eight governments and industry players have until May 4 to lodge objections to the proposal in the final chapter of a case which began with raids on offices in 10 countries in 2011.
Its complex, politically-charged investigation has played out against the backdrop of tense relations since the EU imposed sanctions on Russia over the annexation of Crimea in 2014 and the subsequent conflict in east Ukraine, as well as deep disagreements over the Syrian civil war.
Brussels officials have repeatedly said they want to reduce the EU’s reliance on Russian gas. Moscow argues the antitrust case is politically motivated — something denied by Brussels.
With a settlement, however, Russia would accept EU authority in applying competition law — something it has long balked at. If it fails to abide, the EU could still impose fines.
In the five years since the EU began its antitrust probe, Gazprom has shifted its strategy under pressure from increased competition from LNG imports, price arbitration cases brought by Western customers and more liquidity on Europe’s energy markets. — Reuters
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