Tuesday

22nd Jan 2019

EU documents lay bare Russian energy abuse

  • "Politically driven pricing ... is focal point of Gazprom corporate strategy" (Photo: Mitya Aleshkovsky)

Russian firm Gazprom has been strangling EU energy markets for years, documents show, as the European Commission takes aim at its new pipeline, Nord Stream 2.

The Russian firm's "abusive practices" were highlighted in internal commission documents, which came to light on Tuesday (10 April), pertaining to a seven-year old anti-trust dispute.

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  • Vestager to decide anti-trust case in next few weeks (Photo: ec.europa.eu)

The papers included a 272-page Statement of Objections, dated 2015, four years after EU officials raided some 20 Gazprom offices in European cities in 2011, seizing more than 150,000 of the firm's files.

They also included a five-page annex entitled Preliminary Assessment of the Commitments Proposed by Gazprom.

The objections document said the Russian firm had hindered cross-border sales of gas in Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, and Slovakia.

It said the "purpose was to segment the internal market along national borders" so that Gazprom could impose "unfair pricing" in the region.

It also said the Russian company had "leveraged its dominance by conditioning gas supplies … on obtaining certain non-related commitments" from clients, for instance by forcing Poland to yield control over the Yamal gas pipeline in northern Europe.

The annex detailed how Gazprom used destination clauses, re-export bans, restrictions on metering stations, and refusals to change delivery points to "segment" the EU states.

It said Denmark, Finland, Italy, and the Netherlands had also suffered from "significantly" excessive prices, but said the commission had decided to exclude this from its anti-trust proceeding.

"Unfair and politically driven pricing (linked to the Russian Federation's policy in CEE) is the focal point of Gazprom corporate strategy," the commission annex said, referring to Central and Eastern Europe.

Vestager decision

The old rap-sheet came out as EU anti-trust chief Margrethe Vestager prepares to decide, in April or May, whether to settle with Gazprom in light of subsequent pledges to mend its ways, or whether to impose fines, which could amount to billions of euros.

It also came out amid efforts by Vestager's colleague, energy commissioner Maros Sefcovic, to make sure that a new Gazprom pipeline to Germany, Nord Stream 2, does not lead to further Russian abuse.

The expose of Gazprom's past sins added to political pressure for Vestager to take a hard line.

"Instead of sanctions … amicable settlement Gazprom-EC?", Jacek Saryusz-Wolski, a Polish MEP, tweeted in response to the documents on Wednesday.

"Heavy charges in contrast with indulgent reaction, naive belief in RU [Russia's] doubtful commitments, in total separation from Nord Stream 2 & RU aggression," he added, making the point that Vestager should have addressed the issues of the new pipeline and of Russia's aggression in Ukraine, which began in 2014, in her deliberations.

Nord Stream 2

Meanwhile, Nord Stream 2 is to concentrate 70 percent of Russian gas sales to the EU on the German route if it is built as planned in the Baltic Sea in 2019.

Critics fear this will help Gazprom to halt transit via Ukraine and to cut off CEE states for political reasons, as well as to maintain the "segmentation" of EU markets for the sake of higher prices.

Sefcovic, in a statement on Wednesday, welcomed remarks by German chancellor Angela Merkel, who said on Tuesday that Nord Stream 2's "political" and "strategic" aspects ought to be given more thought.

"I very much appreciate active involvement of Germany, and notably chancellor Angela Merkel, in finding a solution that would safeguard Ukraine's role of a gas transit country," Sefcovic said.

He also spoke to Russian energy minister Alexander Novak by phone, who assured him that there would be "uninterrupted supplies of natural gas to Europe via transit through Ukraine after 2019".

Novak's promise comes after Gazprom chief Alexei Miller, who is now on a US sanctions list, made the same commitment on Tuesday.

Russian promises

An EU source told EUobserver that Russia's promises were not being taken at face value, however.

"The commission remains of the view that Nord Stream 2 … does not enhance our energy security", the source said.

The EU contact added that Novak and Miller's pledges to keep gas flowing though Ukraine did not add up.

"If the Ukrainian transit route is maintained, the legitimate question is whether Nord Stream 2 is needed and at what capacity. Our estimates show that with all existing and prospective import capacity, the EU would see a capacity of 900 bcm [billion cubic metres of gas a year], while our needs stand at approximately 400 bcm," the source said.

With Germany and Russia alone having the legal prerogative to decide on Nord Stream 2, the EU source added: "At the same time, we cannot change the cards we are dealt because a lot depends on national governments".

Merkel: Nord Stream 2 is 'political'

Germany has for the first time acknowledged concerns on the "political" and "strategic" aspects of Russia's Nord Stream 2 gas pipeline.

US yet to push on Nord Stream 2 sanctions

Washington would still like to block a planned gas pipeline between Russia and Germany but is not yet considering hitting companies involved in the project.

Analysis

Is Germany more hawkish on Russia?

Germany's socialist foreign minister just said the EU should "step up pressure" on Russia. Merkel aired "political" doubts on a Russian pipeline.

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