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Gazprom losing positions on European and CIS markets

August 28, 2013, 10:45 UTC+3
Last week, Ukraine withdrew from the group of Gazprom's three largest clients
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European regulators are drawing an official claim to Gazprom in connection with the gas giant's alleged violation of anti-monopoly legislation, the newspaper Novye Izvestia reported. The document might be finalized by yearend, if Russia and the EU do not begin talks over the settlement of the EU claims. Meanwhile, the company has been losing its positions on markets of the Commonwealth of Independent States.

Last week, Ukraine withdrew from the group of Gazprom's three largest clients as other countries cut imports of Russian natural gas, too. Earlier, Gazprom compensated such moves by increasing prices on the domestic market. But experts believe that this time, the monopoly's appetite will be curbed by the state in an effort to prevent social upheavals. In these conditions, experts believe the Russian corporation will turn to Asia.

The sum of possible fine for Gazprom might reach up to 10% of the company’s annual proceeds, in accordance with European anti-monopoly legislation. Last year, Gazprom's proceeds from gas supplies reached $56 billion.

On Tuesday, Russian Foreign Minister Sergei Lavrov intervened on Gazprom's behalf. He stated that Moscow was "concerned over the antimonopoly probe which the European Commission began last year against Gazprom, a company that makes a considerable contribution to strengthening energy security on the European continent."

Lavrov noted that among the accusations are imposing the gas price upon the consumers and pegging it to the price of oil. "But this formula, developed by the Dutch, has never been challenged until today, and is used by other suppliers of gas to Europe. If sanctions are taken against Gazprom, it will find it difficult to operate on the markets where it is obviously discriminated against."

But Russian foreign ministry protests can hardly calm down the Europeans, the Novye Izvestia noted. Especially because the gas monopoly encounters increasing competition on this market which currently accounts for three-third of its revenue. That the gas giant is facing new reality is shown by the fact that last year, it had to cut prices for European consumers by 10% on average under the pressure of legal actions.

Gazprom has problems on other markets. Ukraine has cut the purchase of Russian gas. In the first half of 2013, it bought 40% less gas from Gazprom year-on-year. Gazprom's supplies to Moldova decreased, too, and the experts to Belarus remained at the 2012 level. Russia's natural gas consumption decreased by 10%. The company's first half financial report showed a 35% decrease in net profit to 250.1 billion rubles, and it expects further decrease in annual indicators, the Novye Izvestia wrote.

Most likely, Gazprom will try to compensate its losses in the eastern direction, but the talks with China which demanded a cut in gas prices, are proceeding with difficulty.

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