Monday

18th Feb 2019

Analysis

Good day for Russia in Europe

  • Gazprom in Russia: Putin's friends won NS 2 construction contracts (Photo: gazprom.com)

Russian firm Gazprom is a reformed character, the European Commission has said, improving the climate for new pipelines to Europe.

"Cher Vladimir [Putin]", the Russian leader, is also a European "partner", France said the same day, amid extravagant diplomacy in St Petersburg.

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  • Putin (l) and Macron ate caviar in St Petersburg (Photo: Kremlin.ru)

When commission sleuths raided Gazprom offices in 10 EU capitals seven years ago on Lithuania's tip-off, few doubted what they would find - evidence that it had screwed clients in eastern Europe with excessive prices and blocked them from sharing gas.

Find it they did, as the commission later spelled out in a statement of objections.

But on Thursday (24 May), anti-trust commissioner Margrethe Vestager said there was no fine to pay because the Russian firm had agreed to play ball.

Gazprom had "agreed to play by European rules" and was now locked into "a structured process", she told press in Brussels.

She spoke of "obligations that bind and that will bite". "We can impose a fine if the obligations are broken," she said, referring to multi-billion euro penalties.

Those obligations included letting EU clients resell Russian gas and take delivery of it where they like. They also included linking Russian gas prices to market prices in Germany.

Russian aggression in Europe has raised tension to levels reminiscent of the Cold War.

Dutch investigators underlined that when they concluded, also on Wednesday, that Russian forces supplied the missile which shot down flight MH17 over Ukraine in 2014.

But the commission was guided purely by thoughts of EU consumers when it declined to fine the Kremlin gas firm, Vestager said.

"This is about what rules to play by no matter your flag, no matter your ownership," she said.

"I know some [EU states] would have liked to see us fine Gazprom no matter what the solution on the table. A fine would not have achieved our competition objectives," she added, alluding to Lithuania and Poland, who say Putin uses gas as a foreign policy weapon.

NS 2 climate

The settlement mends Gazprom's image, with its chiefs, Alexei Miller, who is on a US blacklist, and Alexander Medvedev, welcoming the "reasonable" EU decision.

It comes amid the firm's plan to build a controversial pipeline from Russia to Germany this year.

The Nord Stream 2 (NS2) pipeline would make it easier for Putin to cut-off Western allies, including Ukraine, for strategic reasons, and to gouge prices, Poland and Nordic states have said.

It would also help Putin to line the pockets of his friends, such as Gennady Timchenko and Arkady Rotenberg, whose firms build pipelines for Gazprom, hardening the Russian leader's grip on power.

Vestager's decision removed an obstacle from NS2's path, according to Anders Aslund, a Russia expert at the Atlantic Council, a Washington think tank.

"That the EU competition case against Gazprom had not been concluded was a strong argument against NS2, which now has disappeared," he told EUobserver.

The decision would "heat up" the NS2 debate, according to Stefan Meister, from the German Council on Foreign Relations, a think tank in Berlin.

"It will make the countries who are against NS2 even more aggressive and angry with the commission," he said.

But those countries have no power to stop the pipeline from being built.

They also have little power to stop Russia from reverting to abusive behaviour after NS 2 is laid in steel.

"This decision … will not do away with the alleged political agendas coming with Gazprom," Andreas Goldthau, a Russia expert at Royal Holloway University in London said.

"I have my doubts," Meister said, "if that [Vestager's 'obligations'] will change Gazprom's policy. It'll take time to decide on penalties and that'll give opportunities for the Russian side to influence the process."

Bouquet diplomacy

Russia has about 140 diplomats and at least €14m a year worth of lobbyists who seek influence in the EU capital.

The French and German leaders are also prepared to make Putin look good for the sake of grand diplomacy and for national energy interests.

France's Emmanuel Macron met the Russian president in St Petersburg the same day the commission ruled on Gazprom.

They met in a palace and ate caviar. Macron addressed Putin as "cher Vladimir" and quoted Russian writers, while Putin gave his wife flowers in what Russian media called "bouquet diplomacy".

France and Russia disagreed on various things, Macron said, but called for "strong multilateralism" on Iran nuclear non-proliferation.

"I hope Russia understands France is a credible and trustworthy European partner," he said.

The visit focused on Iran and was not linked to the Gazprom decision, but Macron brought a business delegation, including French energy firm Total, who invested $2.5bn in Russian gas projects.

French firm Engie is among EU backers of NS 2, along with Anglo-Dutch company Shell, Austria's OMV, and German firms Uniper and Wintershall, who also sent top men to meet Gazprom in St Petersburg on Wednesday.

The St Petersburg crush came one week after German chancellor Angela Merkel met Putin and agreed to build NS2 .

With Gazprom preparing to extend its power in Europe, Meister, from the Berlin think tank, said Vestager's settlement might help despite its clunky mechanisms.

"It's a step forward, because it gives the EU the opportunity to punish Gazprom for misbehaviour," he said.

Gazprom's nature

Vestager made a "smart choice" even if the deal did not change Gazprom's nature, the London university's Goldthau said.

"Whatever the Kremlin thinks Gazprom is, the EU will treat it as a dominant market player … and it has a track record in forcing big corporations to adhere to the EU market regime," he said, referring to aggressive EU fines on US corporations.

"The task will be to … make Gazprom live up to its commitments," he added.

Europeans ought to be building their own energy security instead of relying on Russia's word, Berlin's Meister also said.

"Only a truly competitive market, with alternative suppliers, LNG [liquid gas] terminals and interconnectors will protect member states" from Russian machinations, he said.

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