EU Formally (And Spitefully) Files Anti-Trust Charges Against Gazprom

Tyler Durden's picture

With talks between Greece and its creditors expected to go mostly nowhere in Riga later this week, and with speculation about an energy deal between Athens and Gazprom looking less like speculation and more like reality with each passing day, we’ve suggested that it's only a matter of time before Russia officially becomes Greece’s White Knight by providing a cash advance on the gas deal. 

Greece has recently taken to seizing local government cash reserves to pay the bills (including pensions and salaries) and with the ECB reportedly considering 50% haircuts on collateral pledged for ELA by Greek banks (the same Greek banks which FinMin Varoufakis said yesterday were “adequately capitalized”), Athens could sure use the cash, and as we enjoy pointing out, it’s an all-around win for the Kremlin as cash given to Greece will be used to make debt payments to the IMF which is set to deliver a €2 billion tranche of aid to Kiev in June, and that bailout funding will promptly be funneled right back to Russia via payments to Gazprom.

As a reminder, here’s a map of the Turkish Stream pipeline…

...and here’s the complete payment schedule for Greece:

None of this is good news for Europe as grappling with a Grexit (and any redenomination risk-fueled contagion that goes along with it) while simultaneously having to swallow a Russian pivot by Athens is a decisively undesirable outcome to the whole debacle, and so, as previewed here on Monday, Europe is going the spite route by filing antitrust charges against Gazprom. 

Here’s WSJ:

“All companies that operate in the European market — no matter if they are European or not — have to play by our EU rules,” the bloc’s antitrust chief Margrethe Vestager said in a statement.

 

The Gazprom investigation, which began 2½ years ago, had been moving toward a settlement early last year, but stalled after Russia’s annexation of Crimea in March last year. EU officials had worried that filing charges against the Russian company would be interpreted by the Kremlin as a political act.

 

In a statement Wednesday, the EU said it had reached the preliminary view that Gazprom was hindering competition in the gas-supply markets in eight EU countries-—Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland and Slovakia.

 

Gazprom “may have built artificial barriers preventing gas from flowing from certain Central Eastern European countries to others, hindering cross-border competition,” Ms. Vestager said.

And a bit more from Bloomberg:

Settlement talks with Gazprom froze as tensions escalated over Russia’s actions in Ukraine, where it annexed the Crimea region and was accused of supporting an insurgency that’s threatened to split the country apart. Power politics seeped into the case from the start after Russian President Vladimir Putin signed a decree giving the government the right to protect Gazprom from EU inquiries.

 

“This will certainly not improve the EU-Russia relations,” said Paul Ivan, a former Romanian diplomat who is now an analyst with the European Policy Centre in Brussels. “We can expect angry answers and moves from the Russian side, but it will not shatter relations either.”

 

The statement of objections accuses Moscow-based Gazprom, which supplies more than a quarter of the bloc’s natural gas, of pursuing an unfair pricing policy in Bulgaria, Estonia, Latvia, Lithuania and Poland. The commission said the territorial restrictions imposed by Gazprom may result in wholesalers facing prices that are significantly higher than the company’s costs or benchmark rates.

 

These unfair prices result partly from Gazprom’s price formulas that index gas prices in supply contracts to a basket of oil product prices and have unduly favored Gazprom over its customers, the EU said.

 

Gazprom responded by saying the complaint isn’t final and that it expected there’d be a solution with the help of Russian government.

 

“The case is definitely political,” said Alexander Kornilov, a senior oil and gas analyst at Alfa-Bank in Moscow. He estimates a potential fine at as much as $840 million.

Here's what the European Commission imagines "alleged abuse" of one's dominant position in the market for natural gas might look like:

Summing up, it’s power, politics, and energy on full display with Grexit and the crisis in Ukraine as the backdrop. If only there were a way to strip Gazprom’s leverage over Europe… 

*  *  *

Here is the official statement from the European Commission:

Antitrust: Commission sends Statement of Objections to Gazprom for alleged abuse of dominance on Central and Eastern European gas supply markets

22 April 2015

The European Commission has sent a Statement of Objections to Gazprom alleging that some of its business practices in Central and Eastern European gas markets constitute an abuse of its dominant market position in breach of EU antitrust rules. See Factsheet for further details.

On the basis of its investigation, the Commission's preliminary view is that Gazprom is breaking EU antitrust rules by pursuing an overall strategy to partition Central and Eastern European gas markets, for example by reducing its customers’ ability to resell the gas cross-border. This may have enabled Gazprom to charge unfair prices in certain Member States. Gazprom may also have abused its dominant market position by making the supply of gas dependent on obtaining unrelated commitments from wholesalers concerning gas transport infrastructure.

Gazprom now has 12 weeks to reply to the Statement of Objections and can also request an oral hearing to present its arguments. The Commission will fully respect Gazprom's rights of defense and carefully consider its comments before taking a decision. Sending a Statement of Objections does not prejudge the final outcome of the investigation.

EU Commissioner in charge of competition policy Margrethe Vestager said: "Gas is an essential commodity in our daily life: it heats our homes, we use it for cooking and to produce electricity. Maintaining fair competition in European gas markets is therefore of utmost importance.

All companies that operate in the European market – no matter if they are European or not – have to play by our EU rules.

I am concerned that Gazprom is breaking EU antitrust rules by abusing its dominant position on EU gas markets. We find that it may have built artificial barriers preventing gas from flowing from certain Central Eastern European countries to others, hindering cross-border competition. Keeping national gas markets separate also allowed Gazprom to charge prices that we at this stage consider to be unfair. If our concerns were confirmed, Gazprom would have to face the legal consequences of its behaviour."

The Commission's preliminary findings in the Statement of Objections

Gazprom is the dominant gas supplier in a number of Central and Eastern European countries. In light of its investigation, the Commission's preliminary view is that Gazprom is hindering competition in the gas supply markets in eight Member States (Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland and Slovakia). The Commission finds that Gazprom implements an overall abusive strategy in these gas supply markets, in particular:

Gazprom imposes territorial restrictions in its supply agreements with wholesalers and with some industrial customers in above countries. These restrictions include export bans and clauses requiring the purchased gas to be used in a specific territory (destination clauses). Gazprom has also used other measures that prevented the cross-border flow of gas, such as obliging wholesalers to obtain Gazprom’s agreement to export gas and refusing under certain circumstances to change the location to which the gas should be delivered. The Commission considers these measures prevent the free trade of gas within the European Economic Area (EEA).

These territorial restrictions may result in higher gas prices and allow Gazprom to pursue an unfair pricing policy in five Member States (Bulgaria, Estonia, Latvia, Lithuania and Poland), charging prices to wholesalers that are significantly higher compared to Gazprom’s costs or to benchmark prices. These unfair prices result partly from Gazprom's price formulae that index gas prices in supply contracts to a basket of oil product prices and have unduly favoured Gazprom over its customers.

Gazprom may be leveraging its dominant market position by making gas supplies to Bulgaria andPoland conditional on obtaining unrelated commitments from wholesalers concerning gas transport infrastructure. For example, gas supplies were made dependent on investments in a pipeline project promoted by Gazprom or acceptingGazprom reinforcing its control over a pipeline.

The Commission's provisional findings are that these practices constitute an abuse of Gazprom's dominant market position prohibited by Article 102 of the Treaty on the Functioning of the European Union (TFEU). Such behaviour, if confirmed, impedes the cross-border sale of gas within the Single Market thus lowering the liquidity and efficiency of gas markets. It raises artificial barriers to trade between Member States and results in higher gas prices.

Background

The Commission opened formal proceedings against Gazprom on 31 August 2012.

Gazprom is the dominant natural gas supplier in all Central and Eastern European countries, with market shares well above 50% in most, and in some countries up to 100%.

Article 102 TFEU prohibits the abuse of a dominant market position, which may affect trade between Member States. Implementation of this provision is defined in the Antitrust Regulation (Council Regulation (EC) No 1/2003), which can be applied by the Commission and by the national competition authorities of EU Member States.

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Haus-Targaryen's picture

 

So what?  The EU calls Gazprom a cartel and its abusing its market condition, the Russians shrug their shoulders, flip the Commission the bird, send out the next gas bill, & go take a Eucalyptus Sauna and Vodka break. 

Arius.'s picture

germany recently ordered 100 tanks .... tanks do not mix well with sauna and vodka...

demoses's picture

Russians know how to deal with german tanks....

philipat's picture

Damn t, why don't these antsy Europeans just stop buying Russian gas? No, wait.............

Publicus's picture

Russia should just shut off the gas, forever.

toady's picture

Spring is in the air, so attack Gazprom. Expect this to be resolved with hugs & kisses in the fall as they beg for a good price for winter heat.

tired1's picture

Here's a good analysis of Putin's game plan, worth a read:

 

What does Putin want? A major analysis by Rostislav Ishchenko (must read!)

Foreword by the Saker:

The analysis below is, by far, the best I have seen since the beginning of the conflict in the Ukraine.  I have regularly posted analyses by Ishchenko on this blog before, because I considered him as one of the best analysts in Russia.  This time, however, Ishchenko has truly produced a masterpiece: a comprehensive analysis of the geostrategic position of Russia and a clear and, I believe, absolutely accurate analysis of the entire “Putin strategy” for the Ukraine.  I have always said that this conflict is not about the Ukraine but about the future of the planet and that there is no “Novorussian” or even “Ukrainian” solution, but that the only possible outcome is a strategic victory of either Russia or the USA which will affect the entire planet.  Ishchenko does a superb overview of the risks and options for both sides and offers the first comprehensive “key” to the apparently incomprehensible behavior of Russia in this conflict.  Finally, Ishchenko also fully understands the complex and subtle dynamics inside Russian society.  When he writes “Russian power is authoritative, rather than authoritarian” he is spot on, and explains more in seven words than what you would get by reading the billions of useless words written by so-called “experts” trying to describe the Russian reality.

 

http://thesaker.is/what-does-putin-want-a-major-analysis-by-rostislav-is...

Peter Pan's picture

Do those German tanks run on Russian gas?

Midnight Hour's picture

Oh yes, the Russians know how to deal with german Panzers. First they shit themself and then turn around and run like hell.

cheech_wizard's picture

So you were born when? Just curious, because quite a bit has changed since WWII. Perhaps you've heard of this fascinating new technology, it's called the Internet.

ThanksChump's picture

Wow. That's the other end of the IQ scale, folks. It was all conjecture and theory until now.

Haus-Targaryen's picture

100 additional German tanks aren't for the Russians.  Good luck getting 3 German guys into 100 German tanks to face off with Russia's 13,000.  Would never happen.  100 additional tanks are for immediate closure of American military bases in Germany when the US and the Russians decide its time to start WWIII and Germany decides to sit this one out.  

Zwelgje's picture

Germany is occupied territory, it doesn't decide anything substantially and must be contend with the role of minor sheriff. Ask the Greeks.

Haus-Targaryen's picture

Germany is occupied territory.  This is correct.  However, as soon as Washington orders Berlin to go after Moscow again -- watch how quickly Berlin decides its had enough of being a colony.  

Zwelgje's picture

I hope you're correct. Regards,

Haus-Targaryen's picture

Me too.  

Germany's ultimate success or failure is completely dependent on this choice.  

If Germany goes after the Russians again, it will be the end of Germany.  

If Germany decides to sit this one out, all the draft dodgers and the girlfriends will relocate to Germany to avoid the incoming shitstorm.  The losers (aka any country found between Germany and Russia) will be completely destroyed, and many of these people will decide its better to stay in Germany than go back to a destroyed country.  Germany uses the "let your enemies fight one another and you come out on top" tactic employed by the British and Americans against the Germans for thep ast 150 years against them.  Germany's demographic problem gets solved, its new immigrants are essentially more blondies (it'll make the PEGIDA people shut-up) and comes out on the other side materially stronger.  

Motasaurus's picture

Germany got thrown under the bus by London, when they played their great game of National Socialism V Socialist Communism. 

National Socialism won, in the end, but Germany lost out.

Next up is the great game between National Socialism and oh, more National Socialism. I guess once TPTB decided which model worked best to keep people in line all that was left was to wittle down the numbers. I have no idea if Germany gets to survive the destruction of this round.

Are there any Red Shield banks left in the Fatherland? That will probably answer the question. 

Haus-Targaryen's picture

I am sure there are.  I have no idea, TBF.  

I can't think of anything that would cause the capitulation of a German government faster than ordering an attack on Russia.  I would imagine they would be out of office faster than the entire Bundeswehr turns in their "Conscious Objector" resignations.  Believe me -- that second one would happen essentially instantly.  No one -- and I mean no one in Germany has any desire to fight the Russians ever again.  

Shoot, you have a German government order an attack on Russia, I imagine there would be a militar coup de etat in Berlin before nightfall.  

Seriously, thats like the only thing I can even remotely imagine that would get Germans of all ages out into the streets screaming bloody murder and having a revolution French style.   

Sandmann's picture

Fatuous, really a fatuous comment

Haus-Targaryen's picture

Irony in action here ladies & gentlemen. 

Consuelo's picture

The entire shootin' match over there has always been, and will ultimately boil down to, Germany's decision (or not) to run its own Foreign Policy, sans Diktat from the State Department.    It's all noise until Ramstein 'downsizes' - permanently.

Svendblaaskaeg's picture

I sure dont hope the Germans would think of Denmark as an escape resort in the event of a conflict with the east, Denmark is very small, I fear it may capsize...

SofaPapa's picture

This comment gives me a rare glimmer of hope.  I've never thought about this, and you make a good point.  The cultural scars in Germany of having attacked Russia and been destroyed for it are deep.  To overcome that fear of self-destruction would be a monumental task.  Even TPTB may not be capable of this.  Thanks for a hopeful thought.

Haus-Targaryen's picture

I'm not saying TPTB won't attempt this -- but there is not a chance in hell that you could get Germans to fight the Russians again.  You'd have to nuke a city HERE to demand some form of response.  

I just see this as an impossability.  

Sandmann's picture

Why should Germans fight Russians ? There are so many Russian families living in Germany, decent people nice families. Why don't the Americans invade Mexico ?

Ghordius's picture

some just firmly believe in WW3, soon. ergo they wonder about where and who, having already decided on what and when

Haus-Targaryen's picture

I am no tin-foil hatter, but if Russia does get activly involved in Ukraine, the US will be forced to either respond or not.  

If it doesn't repond, its guarantees are made worthless.

If it does respond, its WW-III.  Germany is too big of an American ally to let them sit out.  The US would have to get Germany involved, either directly or indirectly.  

Germany, like Sandmann so correctly states -- has no reason to fight the Russians.  Lots of good Russian people here in Germany.  Thus, Germany would have to make a decision right then and there as to what to do.  

researchfix's picture

First we have to get rid of Merkel. She is decision-uncapable.

And bribed or blackmailed, as I wrote before.

Volkodav's picture

Very many Germans in Russia, even since Great Katerine..

 

golden torch's picture
golden torch (not verified) Haus-Targaryen Apr 22, 2015 4:03 PM

I freelance over th? internet and earn about 80-85$ an hour. I was without a job for 7 months but last month my paycheck with big fat bonus was $15000 just working on my computer from my home for 5-6 hours. Here's what i have been doing... www.globe-report.com

Max Damage's picture

Gazprom can just switch off the pipe if it really wanted to show it was dominant. Either that or start proxy wars killing thousands like the west does

illyia's picture

Nothing ever changes: "the best laid plans..." and "each generation learns anew..."

Amazing all the same.

Dazman's picture

Fuck the EU and Fuck the U.S. Both are dictatorships. Sincerely, U.S. Resident.

Ghordius's picture

sincerely, I doubt you even know what you are talking about

meanwhile, Tylers: spite? the whole thing is much simpler: antitrust

the word that disappeared from the US vocabulary?

being the dominant gas deliverer is one thing. messing around with pipelines, a completely different matter

there is no reason why Gazprom should be in both markets, NatGas and critical pipelines

as for net-neutrality... pipeline-neutrality.

that simple, except if you are a (paid) Monopolist-lover or a sympathizer of all things remotely having some "anti-EU" thing attached, regardless of merit

Haus-Targaryen's picture

Gazprom is in it to take advantage of it.  Duah! 

Good luck conviencing the Russians to Split Gazprom in half to appease the EU-weenies.  What is the EU going to do?  Not purchase anymore gas?  lol 

Ghordius's picture

the way you describe it, it's sufficient to become a monopolist and then the world is your oyster, and depends totally from you

and, as monopolist, you can count on legions of "might makes right" supporters ready to attack any anti-trust measure as "anti-business"

thanks, but no, thanks

pipeline neutrality is not that difficult as a concept

meanwhile, note that there are damn wars going on about who gets to deliver gas to Europe, and so to your water-boiler in your bathroom in Frankfurt

Haus-Targaryen's picture

My hot water heater is in my laundry room.  I don't live in a prolet Studentenwohnung anymore. ;) 

Pipeline neutrality in this case does not mean pipeline neutrality, but it translates into "Getting Gazprom to pay to build the pipelines while the EU gets to control them."  

For egregiously obvious reasons, even you should know the Russians will never go for this.   

Ghordius's picture

that translation is wrong. Gazprom could, for example, just sell them. To a different Russian company, for example

you can wind sideways as much as you want, Gazprom IS playing with the control of those pipelines

for example by telling customers that they are not allowed to sell further what they are delivered

godiva chocolate's picture

Any reason EU cannot build its own pipes?

Ghordius's picture

the usual one: redundancy isn't economical

is there any reasons net- neutrality proponents can't build their own internet?

godiva chocolate's picture

Then let EU be the one who build the pipes eveyone can use.

angel_of_joy's picture

More proof (if needed) that EU is run by morons ! In about 2 years this entire discussion will be moot, since the only point of delivery available (beyond Germany) will be at Greece's border with Turkey. Then, it will be back to take it or leave it. Of course, by then EU will be even more FUBAR than it is now, so the entire idea of paying for Russian gas will look slightly ludicrous. The only people with money to pay for gas are the Germans anyway, and they had the brains to get their own independent pipeline... Others, not so much !

qomolangma's picture

Btw, why don't the EU sue the USA for the internet dominant position? It's a serious question.

Haus-Targaryen's picture

No, no one calls that box in your bathroom that makes strange noises that a cute little blonde from the Stadtwerke comes to check on once a year a "water boiler."  It is a hot water heater.  

Unless you are talking about something else.  

Ghordius's picture

Brits do call several things differently from you

"A lorry delivered my new hot water boiler", for example

Your language... Our problem

Haus-Targaryen's picture

BWah, the British cannot speak the English language correctly.  

detached.amusement's picture

yadda yadda, and the Ukranians siphoning unpaid gas and not paying their bills has NOOOOOTHING to do with this...

Ghordius's picture

Ukraine isn't in the EU. So no, it is related, but not directly

a lot of commenters here seem to look everything through the geopolitical lens only, and miss some of the dephts of the current EU anti-trust initiatives. Anti-trust is one of the tasks of the EU org

detached.amusement's picture

remind us all the route the gas takes to get there

 

remind us all how many EU countries are spouting the garbage about "russia's actions in ukraine" 

 

but of course it would have been too much to ask them to pay their bill or stop stealing gas.

 

and how's about the other pipelines?  oh wait, they're from russia, so we dont want them?

 

EU anti trust is a joke, its built upon the foundational Trust of banksters

 

so once again, all back to the same root.

 

the One Trust wants no other Trusts to deal with.