Kremlin backs its dog in EU-Gazprom fight

07.09.12 @ 09:44

  1. By Andrew Rettman
  2. Andrew email

BRUSSELS - The Kremlin has started putting pressure on the EU for a friendly "settlement" on Gazprom one day after the European Commission said the affair is a purely commercial matter.

  • Gazprom's shares took a further hit on news of the EU investigation (Photo: davidgordillo)

Speaking in an interview with the Wall Street Journal on Thursday (8 September), Russia's EU ambassador, Vladimir Chizhov, said: "We always favour negotiated solutions because nobody wants a gas war."

He added that if Gazprom "reaches some kind of agreement, be it with the commission, or be it with member states, or be it with European energy companies ... I would only welcome it."

Echoing Gazprom's statement earlier this week, which indicated the firm is too big a deal for EU officials because it is a Russian "strategic organisation," Chizhov poked fun at Brussels' regulatory ambitions.

"The European Commission can look into anything it wants: whether there is life on Mars or whether there are some irregularities in Google or Gazprom or Microsoft," he quipped

The ambassador also described the anti-trust probe as an "irritant" in EU-Russia's "strategic partnership."

For his part, Russian President Vladimir Putin's spokesman, Dmitry Peskov, also on Thursday told Reuters in Vladivostock: "There is no talk about retaliation measures. Gazprom has in the course of many decades proven its reliability as natural gas supplier."

The assurances on gas wars highlight Russia's record of using Gazprom to settle political disputes with neighbours.

In 2009 it cut off gas to Ukraine in a price war designed to undermine its Russia-hostile leaders, causing blackouts in EU countries, such as Bulgaria, which depend on gas transit through Ukraine.

In contrast to Peskov's line, commission President Jose Manuel Barroso at the time described Russia as a banana republic.

"I've been involved in mediation processes since I was young, including in African matters. It's the first time I saw agreements that were systematically not respected ... Gas coming from Russia is not secure," he said.

The commission probe, which could end in a 10 percent fine of Gazprom's income in eight EU countries, saw its shares drop by almost 2 percent this week.

It is the latest in a line of blows to Russia's energy champion.

Gazprom last week said it has to stop development of the Shtokman gas field in the Barents Sea because it costs too much.

On Thursday, it said it has to refund European customers €1.9 billion for the first quarter of 2012 because of unduly high prices in long term contracts.

Its first quarter profits are down 24 percent year-on-year and its shares are trading at more than 60 percent less than in 2008 due to lower demand and global diversification into shale and liquid gas.

The Kremlin's use of the firm as a political instrument has also cost it dearly.

Gazprom lost billions in the gas war with Ukraine. Its investment in underwater pipelines - Nord Stream and South Stream - designed to maintain its Cold-War-era sphere of influence in eastern Europe overlooks cheaper land-based options. It also haemorrhages money on discounts aimed at keeping Belarus on side.

Meanwhile, amid Chizhov's gentle mockery of EU probes into "life on Mars," EU officials and diplomats are themselves indulging in a bit of schadenfreude.

One email doing the rounds in EU institutions makes fun of a tune by Vladimir Tumayev, the head of Gazprom subsidiary Spetsgazavtotrans.

"Let's drink to you. Let's drink to us. Let's drink to all the Russian gas ... That it never comes to an end," the cheesy song goes.