EU asks CEE to comment on Russian gas promises

By bne IntelliNews March 14, 2017

The European Commission has invited comments from Central & Eastern European states on proposals put forward by Russian gas giant Gazprom to meet competition concerns.

Visegrad and the Baltic states are, for the most part, hugely reliant on Russian gas imports. The likes of Lithuania and Poland have in the past fought legal battles over the price and conditions contained in long-term contracts with Gazprom, and argue that Moscow uses its dominant position to maintain political leverage across the region.

The EU executive launched a challenge on competition grounds in 2013, and renewed that effort last year. However, talks have been ongoing in recent months, and Gazprom has now offered a compromise, the commission announced.

Although Brussels said it wants to hear the opinions of the consumers, the EU stance appears more than clear.

Commissioner in charge of competition policy, Margrethe Vestager, said: "We believe that Gazprom's commitments will enable the free flow of gas in Central and Eastern Europe at competitive prices. They address our competition concerns and provide a forward looking solution in line with EU rules. In fact, they help to better integrate gas markets in the region.”

That praise for the Russian gas giant will likely stir suspicion in certain parts of CEE. Poland is in the midst of efforts to block the construction of Nord Stream 2, an addition to the line under the Baltic Sea with a capacity of 63bn cubic metres per year that delivers directly to Germany.

Warsaw has blasted a recent commission deal to allow Gazprom to raise deliveries through Nord Stream 1. The pipeline is part of Russia's plan to re-route all European deliveries away from the main line through Ukraine by 2019.

The case, which began with raids on Gazprom offices in 2011 and was formally launched in 2012, focused on gas supplies to eight EU states - Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, and Slovakia

The commission now says it considers the commitments offered by Gazprom meet its objectives regarding competition concerns.

The Russian company says it will remove restrictions to re-sell gas cross-border once and for all, which formerly saw states forced to pay for unused gas via ‘take-or-pay’ clauses. The restrictions also dented energy security efforts by suppressing the opportunity for states to sell to others in need. CEE states have found themselves without gas – or threatened with limited supply - on more than one occasion when politics have interrupted flows from the east.

Gazprom also promised that prices in Central and Eastern Europe will reflect competitive price benchmarks. The company also said it will not act on any advantages concerning gas infrastructure, which it has obtained from customers by having leveraged its market position in gas supply.

Unsurprisingly, Poland's main gas utility PGNiG - which has led the opposition to Nord Stream 2, was not impressed.

“Our initial assessment shows that the commitments are insufficient to remove the negative impact of Gazprom competition breach in the CEE markets, including Polish market,” CEO Piotr Woźniak told the FT. “They may not make any significant contribution to change the situation that triggered the commission action in 2012. We consider the commission’s acceptance of those commitments as highly insufficient.”

 

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