EU set to charge Russia's Gazprom over CEE gas prices

By bne IntelliNews October 4, 2013

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The EU is ready to step up its anti-trust investigation into Gazprom and is preparing formal legal proceedings over its claims that the Russian gas firm is leveraging its market dominance in Central and Eastern Europe to overcharge consumers, an official said on October 3. The move - announced in Lithuania - comes as Vilnius is taking the lead in a growing fight between Brussels and Moscow over energy and trade.

The EU launched an investigation into Gazprom's supply contracts in the Baltic states, Poland, the Czech Republic, Slovakia, Hungary and Bulgaria in 2012. Speaking at a European Competition Day hosted by Lithuania, which holds the EU's six-month rotating presidency, Competition Commissioner Joaquin Almunia said Brussels is now ready to take further action.

"It would be premature to anticipate when the next steps might be taken, but we have now moved to the phase of preparing a statement of objections," Almunia said, according to a European Commission statement. That is the first step towards formal charges, in a legal case that could see Gazprom fined as much as €11bn. Companies can be penalised up to 10% of annual revenue for breaching EU anti-trust rules.

The timing of the announcement is no accident. Lithuania is in the midst of heated negotiations over a new gas supply contract with Gazprom, amid complaints by Vilnius that it has met unreasonable demands from the Russian side. Lithuania, which is currently dependent on Russia for all of the 3bn cubic metres or so it consumes each year - claims that it pays around 30% more for Russian gas than other EU customers.

A leading proponent of the Baltic state's efforts to diversify its gas supplies - a fight in which it has employed EU competition rules as a leading weapon - is Dalia Grybauskaite, who was standing alongside Almunia at the press conference and insisted to the same audience that unfair energy prices pose a major obstacle to the EU competitiveness.

"We suspect that Gazprom has been hindering the free flow of gas across member states and the diversification of sources of supply," Almunia said, pointing out that Brussels has added a complaint from Vilnius to the action. "We are dealing with the complaint by Lithuania, which was filed after our preliminary probe had started," he noted.

The EU's aggressive push is also clearly meant to show support for Lithuania in its role on the frontline of the fight over plans for several former Soviet states to sign off on EU trade and association agreements at a summit in the Lithuanian capital in November. Moscow has launched trade blockades against the likes of Ukraine and Moldova in a bid to push them to join its Customs Union instead.

Russia is also taking action against Lithuania. The country's vital transport sector has been hit for huge losses by increased customs checks for close to a month. On October 2, Russian chief public health official Gennady Onishchenko repeated warnings that - just like Ukrainian chocolate and Moldovan wine - Lithuanian dairy products may soon be barred from the market due to "sanitary and epidemiological risks".

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