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Almost a year after the high-profile searches in the offices of the European subsidiaries of Gazprom and its partners, the European Commission has launched an official antitrust investigation against the group. Gazprom is suspected of obstructing competition on the gas market in Central and Eastern Europe. If the fault of Gazprom is proven, it faces heavy fines and revising the whole system of export contracts.
Last year’s searches in the offices of European customers of Gazprom has led to the launch of an antitrust investigation against the group by the European Commission, the Vedomosti daily writes. The fact of the case opening does not predetermine the investigation results, the European Commission stressed in a press release, but it will consider the case as a matter of priority. It studies three episodes on the markets of Eastern and Central Europe - the possible “separation” of markets by Gazprom, creating obstacles to the diversification of natural gas purchases and “unfair” pricing. Gazprom has been notified of the opening of the case. It is unknown when it will yield the results.
The risk of claims to the Russian natural gas monopoly emerged last autumn, the newspaper recalls. Inspectors of the European Commission on September 27, 2011 conducted searches in the European offices of Gazprom and a number of its customers (a total of 20 companies in 10 countries in Eastern and Central Europe). Formally, the Commission conducted the inspections “on the facts” of possible abuse – committed both by the suppliers and customers. Gazprom then was not mentioned in official statements. However, its customers did not hide the fact that the European Commissioners were interested in contracts with the Russian company.
Russian officials have also admitted that the risk is great. “There has been a considerable [Gazprom’s] price dispersion in the long-term export contracts that has not always been determined by the objective market situation. This also increases the risk of persecution by the European competition authorities, to which the recent searches in the European offices of Gazprom and its partners testify,” then Deputy Energy Minister Sergei Kudryashov noted in his March report.
European consumers - especially those that are in litigation with the group because of the cost of Russian natural gas, have repeatedly pointed to the fact that Gazprom not always takes a fair approach to pricing. There were many complaints from Lithuania (it is its statement that gave the European Commission a reason to launch the checks, local media reported earlier). Publicly, they were expressed by the Polish company PGNiG.
The European Commission on Tuesday failed to clarify when the probe will be competed, explaining that it depends on the complexity of the case, the degree of the company’s cooperation and the use of the right to defence by it, the Kommersant daily writes. It is also too early to discuss, according to the European Commission, the final conclusions and sanctions that can be applied, but it might be a fine. A source of the publication familiar with the order of calculation fines in the EC explained that the maximum fine is 10 percent of the revenue (Gazprom’s revenue from gas exports abroad in 2011 reached some 57 billion US dollars).
Vitaly Kryukov of IFD Kapital believes that the EC claims are “very serious” for Gazprom - if its guilt is proven, it will severely hamper the monopoly’s work on foreign markets. He noted that the European Commission most likely has much more weighty arguments against the company than those officially declared. In addition, the analyst said, there are some markets where the dominance of Gazprom is obvious. However, the main problem for the company may become not fines, but the prospect of revising the fundamentals of contracts, such as the pricing formula and the basis for its calculation.
If the fact of violation of European antitrust law by Gazprom is proven, it is facing a heavy fine, but it is difficult to prove malicious intent in such cases, consultant of Yukov and Partners Vsevolod Miller, quoted by RBC Daily, says.
In the view of Raiffeisenbank analyst Andrei Polishchuk, the share of Gazprom in the European market is 25-27 percent, the annual export volume of the holding to the European market - about 60 billion US dollars. So, the fine could amount up to 6 billion US dollars.