EC suspects Gazprom of abusing its dominant market position in Estonia, 7 other countries

Gazprom's facilities by the Gulf of Ob, Kara Sea (AFP/Scanpix))
4/22/2015 3:34 PM
Category: Economy

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, including in Estonia, constitute an abuse of its dominant market position, in breach of EU antitrust rules.

The preliminary results of EC's investigation into Gazprom's practices give reason to believe that the company is breaking the EU antitrust rules by reducing its customers' ability to resell the gas cross-border, overcharging buyers in Eastern Europe and hindering competition.

EU Commissioner in charge of competition policy, Margrethe Vestager, said that all companies that operate in the European market – no matter if they are European or not – have to play by the EU rules.

Gazprom is the dominant gas supplier in a number of Central and Eastern European countries - with a market share well above 50 percent in most, and 100 percent in some states. In addition to Estonia, the investigation also pertains to its activities in Bulgaria, the Czech Republic, Hungary, Latvia, Lithuania, Poland, and Slovakia.

The Commission found that Gazprom has implemented an overall abusive strategy in these countries, imposing territorial restrictions (export bans, destination clauses etc.) in its supply agreements with wholesalers and with some industrial customers, an unfair pricing policy that this allows.

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. For example, gas supplies were made dependent on investments in a pipeline project promoted by Gazprom or accepting Gazprom reinforcing its control over a pipeline. All this goes against the Article 102 of the Treaty on the Functioning of the European Union (TFEU) that prohibits the abuse of a dominant market position, which may affect trade between member states.

Such behaviour, if confirmed, impedes the cross-border sale of gas within the European single market, thus lowering the liquidity and efficiency of gas markets. It raises artificial barriers to trade between the EU member states and results in higher gas prices.

The Commission first opened formal proceedings against Gazprom in August 2012.

Gazprom has now 12 weeks to reply to the Commission and present its case.

Russian Foreign Minister Sergei Lavrov dismissed the EU charges against Gazprom, saying they are an unacceptable attempt to retroactively apply the bloc's latest energy rules to earlier contracts, Reuters reported. "All contracts in effect now that Gazprom signed with its partners, were signed with full respect of the legal regime that existed in the EU at the time," Lavrov said in an interview to radio stations.

M. Oll

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