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Gazprom may face 10 bln euro fine in European Commission anti-dumping inquiry

September 05, 2012, 4:51 UTC+3
The European Commission said it did not mean to wage a trade war on Russia over gas delivery terms
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BRUSSELS, September 5 (Itar-Tass) —— The start of a European anti-dumping inquiry into Gazprom is a new step of the European Commission in its dispute with Russia over the principles of trade in energy resources, primarily gas.

The European Commission initiated the formal procedure to see whether the Russian gas supplier, Gazprom, was breaching European competition norms, particularly in Eastern and Central European countries – Poland, Latvia, Lithuania, Estonia, the Czech Republic, Slovakia, Bulgaria and Hungary.

It will scrutinize the situation in the countries that import from two-thirds to the whole of their gas from Gazprom. European norms stipulate a fine of up to 10% of the company annual turnover – more than 10 billion euros in the case of Gazrpom- for violations of the sort.

The European Commission will probe three main suspicions. First of all, Gazprom is suspected of abusing its dominant position on the gas markets of Central and East European countries with the division of markets and impediments to the free gas flow to Europe. Secondly, Gazprom is suspected of impeding diversification of energy supplies to the European Union. Thirdly, it is suspected of pushing high gas prices unfoundedly linked with crude prices on its clients.

The European Commission said it had informed Gazprom about the beginning of the anti-dumping inquiry. European norms do not set deadlines for such procedures.

At the same time, the European Commission said it did not mean to wage a trade war on Russia over gas delivery terms. This is a regular verification of a foreign company’s compliance with European competition norms, a European Commission representative said. The European Commission will make a through and unbiased analysis. The start of the formal procedure does not mean the European Commission deems Gazprom guilty of the violations, he noted.

Yet the European Commission would have hardly started an inquiry into such a sensitive issue if it had not been sure of the validity of its suspicions.

There was a search for evidence of the violations. Almost a year ago, on September 27, 2011, European Commission representatives held sudden searches at Gazprom offices in Central and East European countries and offices of a number of European energy companies in ten states, predominantly Central and Eastern Europe.

The European Commission said on the same day it did not rule out that some of those companies might have conspired to divide the market, to impede diversification of gas delivery routes and the access of new companies to gas grids, as well as to artificially raise gas prices.

The inspections were made at the offices of Gazprom German partners E.ON and RWE, as well as Gazprom subsidiary, Gazprom Germania. In Austria OMV and its branch, Econgas, were checked. In the Czech Republic they checked Vemex, whose controlling stake belongs to Gazprom, and in Lithuania – Lietuvos Dujos. The companies confirmed the inspections and said they were fully cooperative with national and European anti-monopoly bodies.

A European Commission representative told Itar-Tass at the moment they did not mean to start an anti-monopoly inquiry so far. It was just a preliminary inspection, which would either confirm or dismiss suspicions, he said. Now the inquiry has begun.

The European Commission believes that Gazprom violates European norms of competition on the gas market; Russia thinks the suspicions are at least unfounded. The dispute has been dragging on for years.

It entered into a legal stage five years ago, in September 2007, when the European Commission presented the ultra-liberal Third Energy Package. The document was approved in 2009. It was bound to liberalize the European gas market, in particular, with the mandatory separation of pipeline owners and mineral developers.

This is a clash of two economic approaches. The European Commission presumes that the forced establishment of companies transporting gas, crude and electricity, which will be fully independent from energy concerns, will create conditions for the entry of new energy company into the market and, consequentially, lead to a decline of prices.

Russia thinks prices will go up due to the increased number of intermediaries. It adheres to a more conservative principle of natural monopoly. Russia thinks that industries with super-high capital intensity and long payoff periods, such as the energy sector, are more efficient in the case of the minimal number of large market dealers, which have sufficient resources for developing their business.

“The severing of gas pipelines from gas suppliers would be the same as the selling of a car without wheels so that consumers have to seek someone to fasten them,” Russian Gas Union President Valery Yazev told Itar-Tass earlier.

Attempts of the European Union and Russia to resolve this dilemma were not successful. The choice of the strictest way of the Third Energy Package implementation by a number of East European states adds to the problem. These countries do not bother to study details of the European legislative norms but simply use them to gain control over energy infrastructure on their territories.

Although the European Commission emphasized its probe was not about the particular Russian company only and did not relate to Russia-EU relations, one may presume the decision may strain Russia-EU energy relations, especially ahead of the winter season when the demand for resources grows. The mounting refusal of EU member states from atomic energy without thinking about ways to compensate for the deficit makes the situation particularly acute.

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