Leaked document shows EU’s initially hardline approach to Gazprom

Leaked document shows EU’s initially hardline approach to Gazprom
By bne IntelliNews April 12, 2018

The European Commission had initially planned to adopt a hardline position on Gazprom’s allegedly “abusive practices” in selling gas to Central and Eastern Europe, a leaked document showed on April 11.

The document, made available by the Polish news website Biznes Alert, stands in contrast to the Commission’s current approach that appears to favour finding a settlement in the long-running dispute and possibly letting the Russian company off the hook without serious consequences.

That will be viewed in CEE as yet another example of favouring Russian interests over those of the eastern members of the bloc. There is a similar air to the ongoing dispute on whether to allow Russia to build Nord Stream 2, which would double Gazprom’s capacity to pump gas directly to Germany, possibly bypassing Ukraine.

The report also indicated, according to The Telegraph, that Germany benefitted from what it called a "sweetheart deal" with Gazprom. This gave Germany a "competitive advantage in gas costs at the expense of fellow EU economies and [left] front line states at the mercy of Moscow's strong-arm tactics."

The Commission charged Gazprom in 2015 with using its market dominance to overcharge CEE countries and blocking cross-border gas sales in order to segment the CEE market to control what the Commission said was “excessive” pricing.

The charges were the effect of the Commission’s investigation into Gazprom’s business in CEE that began in 2011 after Lithuania filed a formal complaint.

Gazprom and the Russian government, which controls it, have denied any wrongdoing, hinting that the case could be politically motivated. The relationship between the EU and Russia has been at a low since 2014 when Moscow annexed Crimea from Ukraine.

Russia also claimed that Gazprom’s contracts with CEE countries complied with EU regulations at the time, and questioning them now is retroactively applying new EU rules – the so-called Third Energy Package, adopted in 2009 – which Moscow finds unacceptable.

Gazprom still found itself under pressure, and in late 2016 tabled a set of measures to address the Commission’s concerns, most importantly, offering to allow cross-border sales.

That followed hints from Brussels and Moscow that a settlement was possible to end the dispute. A settlement would spare Gazprom some potentially huge fines and remove some pressure on the Russian company to conform to EU energy market rules.

A possible settlement would not go down well in CEE, especially in Poland and Lithuania, which keep calling on Brussels to remain tough on Gazprom. The EU executive is now likely to face even greater criticism for apparently dropping its original strategy to punish the Russian company for years of alleged market abuse.

That said, Competition Commissioner Margrethe Vestager last year said she would rather focus on the future of Gazprom’s relationships to its state clients in CEE rather than the past.

“We found it was most helpful for citizens to have Gazprom’s future behaviour changed,” Vestager said in 2017, according to Politico Europe.