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22nd Jan 2022

Ukrainian gas supplier accuses Gazprom of market abuse

  • Gazprom HQ in Moscow. According to Ukraine's Naftogaz, the Russian gas-giant is abusing its market dominance (Photo: Mitya Aleshkovsky)
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Naftogaz, the largest natural gas company in Ukraine, filed a complaint with the EU competition watchdog against Russia's Gazprom on Wednesday (22 December).

The Ukrainian company accuses Gazprom of abusing its dominant position in the European gas market.

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"Gazprom has sharply reduced its delivery of natural gas to the European spot market, despite growing market demand," Naftogaz CEO Yuriy Vitrenko said in a statement.

According to the complaint Gazprom has stopped selling gas through its electronic platform and is also blocking sales from other private suppliers.

"[Gazprom] is preventing other companies from supplying additional gas to Europe and competing with Gazprom. This is one of the key causes of the crisis contributing to record-high gas prices in Europe," Vitrenko said.

Gazprom has also declined using Ukrainian pipeline capacity to supply larger volumes, despite a 50 percent discount offer by Kyiv.

Naftogaz has now called on the commission to order Gazprom to increase its gas sales.

Responding to the letter of Naftogaz, a spokesperson for the commission has said it would assess the complaint under its standard procedures but did not go into further detail.

European gas prices hit a record high of €181 per megawatt-hour on Tuesday when a pipeline through Belarus bringing in Russian gas to Germany switched part of its flow east, adding to supply fears.

Moscow said that its domestic market is a higher priority right now due to freezing temperatures.

But Naftogaz alleges Gazprom used its market power to force through Nord Stream 2 - the pipeline directly connecting Germany and Russia - at the cost of Ukraine's gas operator.

Kremlin spokesman Dmitry Peskov denied this on Tuesday and said, "there is absolutely no connection [with Nord Stream 2]. This is a purely commercial situation."

High gas prices in Europe have caused ships carrying liquefied natural gas destined for China to change course to the Atlantic, but these are unlikely to solve storage issues in the bloc.

France, Italy, Spain, Poland all have regulations ensuring gas storage facilities are well-filled at the beginning of the winter.

But the Netherlands, Germany and Austria do not, and now have lower than usual storage levels, making them more dependent on gas imports.

Nuclear outages in France added to the energy concerns in Europe this week. Due to maintenance, about one-third of France's nuclear capacity will be suspended in January, forcing the government - which generally exports electricity to adjacent countries - to import gas.

And with Germany planning to close three of its six last remaining nuclear power plants before the end of the year, gas deliveries from Russia look even more crucial in the coming winter months.

When pressed to respond to the gas crunch, EU commissioner for competition Margrethe Vestager told press on Tuesday the EU needs to accelerate investments in renewables.

"We need to phase out our reliance on fossil fuels. And that includes gas. The faster we get to renewables, the less exposed we are to price spikes coming from imported fossil fuels,"

She also said the commission had asked major energy companies, including Gazprom, "if there is foul play in the energy market." She did not go into further details.

Lawyers threaten action over new EU gas and nuclear rules

Environmental lawyers are threatening to take legal action against the European Commission if gas is included in the EU guidelines for sustainable finances. But the draft taxonomy has also triggered discontent among some EU national capitals and MEPs.

Analysis

Hydrogen - the 'no-lose bet' for fossil-fuel industry?

The EU plans to label natural gas as 'green' in sustainable investment rules. From 2026 it will have to be blended with low-carbon gases like green hydrogen - but many scientists warn this is inefficient, costly and damaging to health.

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