Cold War II, Really: EU Sues Gazprom for Antitrust

♠ Posted by Emmanuel in ,, at 4/23/2015 01:30:00 AM
Is it just me or is Schalke 04 having Gazprom as its sponsor similar to having an "I [HEART] SATAN'S WORKS" jersey?
 I had rolled my eyes over the hyperbole about the current freeze in Russia-Western relations being "Cold War II"--until now, that is. Activist EU regulators have long been accused of being busybodies: first with the Microsoft case (which resulted in much ado about nothing) and now, interestingly enough, Microsoft prodding the EU to do something about Google's dominance in cell phone operating systems via Android and its bundling of various apps. To me it's an open-and-shut case of Microsoft's OS being uncompetitive, but hey, I am not an EU competition regulator.

Something I am fairly assured of is that Google will copy the Microsoft playbook in wearing down EU regulators and eventually making token changes. (USA Today's Michael Wolff offers excellent commentary on the upcoming EU v Google case.) However, a reasonable response is not what I'd expect from another case EU regulators are making against the Russian gas giant Gazprom. Having applied all sorts of sanctions that have resulted in doubts about the financial viability of Russian, mostly state-owned firms, to survive without access to Western capital markets, they are now going for Russia's throat.

If Gazprom is not allowed to conduct normal business activities in Western Europe, that is the absolute last straw. What else recourse will Russia have? Other markets are not readily accessible without pipelines, and LNG facilities that will allow Russia to ship gas overseas are not yet fully operational. Go ask the French. Anyway, onto the story:
The European Commission (EC) has charged Gazprom with abusing its dominant market position in Central and Eastern European gas markets. The Commission said its preliminary view was that the Russian energy giant was breaking EU anti-trust rules. It added Gazprom may have limited its customers' ability to resell gas, potentially allowing it to charge unfair prices in some EU member states.

Gazprom rejected the Commission's objections, calling them "unfounded". "Gazprom strictly adheres to all the norms of international law and national legislation in the countries where the Gazprom Group conducts business," the company said in a statement...Brussels began investigating state-controlled Gazprom three years ago, but Moscow says the Commission's allegations are politically motivated.
Yeah, sure, Gazprom. I am sure your activities are not "politically motivated" in the least[nudge-nudge, wink-wink].
The EU's new anti-monopoly chief, Margrethe Vestager, said the Commission had found that Gazprom "may have built artificial barriers preventing gas from flowing from certain Central European countries to others, hindering cross-border competition. "Keeping national gas markets separate also allowed Gazprom to charge prices that we, at this stage, consider to be unfair. "If our concerns were confirmed, Gazprom would have to face the legal consequences of its behaviour." Brussels' competition authority has the power to impose fines of up to 10% of Gazprom's global turnover.

The Commission questioned the formulae the energy giant used to come up with the different prices at which it sold gas to individual countries. "Gazprom's specific price formulae, which link the price of gas to the price of oil products, seem to have largely favoured Gazprom over its customers," it said.

The Commission said that, in its preliminary view, Gazprom was hindering competition in the gas markets in eight Central and Eastern European member states - Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland and Slovakia. Russia supplies about a third of the EU's gas requirements, with half that amount going through pipelines that cross Ukraine.
When cornered, Russia will lash back...and boy does it have a lot of ways to do so. On one hand, I am fairly certain that Gazprom has all sorts of anti-competitive practices. On the other hand, the timing of this case with arch-regulator Margethe Vestager at the controls is most unfortunate and suspicious.

I fear this episode won't end well, to be honest.