EU ends antitrust case against Gazprom without fines

BRUSSELS (Reuters) - Russian gas giant Gazprom clinched a deal with EU antitrust regulators on Thursday to reform its pricing structure and allow rivals a foothold in eastern Europe, avoiding fines in a case that has dragged on for seven years.

FILE PHOTO: The logo of Gazprom is pictured at the 26th World Gas Conference in Paris, France, June 2, 2015. REUTERS/Benoit Tessier/File photo

Europe’s competition enforcer said Gazprom’s concessions allay concerns of market abuse, ending the EU’s longest running antitrust saga that began with dawn raids at 20 offices in 10 countries in 2011.

The EU’s decision to accept Gazprom’s offer has allowed it to escape fines of as much as 10 percent of its global turnover - an outcome that has angered Poland and eastern EU countries which have sought a tougher line from Brussels.

The outlines of the settlement were mapped out more than a year ago, and finalised earlier this year, as Reuters previously reported. But it was delayed by critical feedback from several of the eight member states in the east at the center of the case, all countries formerly dominated by Moscow.

Many are angered by the move to smooth business ties with Gazprom, run by Alexei Miller, an ally of Russian President Vladimir Putin - contrasting it with hefty fines against multinationals such as U.S. tech giant Google.

Poland said the ruling did not go far enough to ensure that Gazprom would now abide by EU rules.

“A far harsher ruling, including a considerable fine, would be fair and well justified,” Polish deputy foreign minister Konrad Szymanski was quoted as saying by state-run news agency PAP.

Lithuania echoed the sentiment. “It’s a pity,” Prime Minister Saulius Skvernelis told reporters in Vilnius. “But still it’s a step forward.”

Europe’s Competition Commissioner Margrethe Vestager said the decision “provides a tailor-made rulebook for Gazprom’s future conduct”.

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“This case is not about the flag of the company – it is about achieving the outcome that best serves European consumers and businesses,” she stressed.

Gazprom has denied the charges which concerned the three Baltic states, Bulgaria, Hungary, Poland, Slovakia and the Czech Republic.

Deputy Chief Executive Alexander Medvedev said Gazprom was “satisfied”, calling the decision “the most reasonable outcome for the well-functioning of the entire European gas market.”


Under the deal, Gazprom will allow clients to ask for lower prices when these diverge from benchmarks such as Western European gas market hubs, scrapping its old system of linking them to oil prices. They may seek price reviews every two years and go to arbitration if a no deal is agreed within 120 days.

The Russian gas export monopoly will remove contractual constraints, which prevent clients from reselling its gas.

In markets isolated by a lack of pipeline infrastructure, Gazprom will give customers the right to change gas delivery points. Swaps will apply for contracts of at least 18 months at fixed delivery fees, including for relatively small amounts of gas and at short notice of just over four months.

“In the countries we are talking about Gazprom is still a dominant player,” Vestager said.

In Bulgaria, which is nearly wholly dependent on Gazprom supplies, the transmission network operator will gain greater control over gas flows. Moscow also offered not to seek damages from the Balkan nation over the cancellation of the planned South Stream pipeline under the Black Sea.

Many of Gazprom’s concessions are in line with changes in its marketing strategy away from long-term, oil-linked contracts, to which the EU objected, as a sea change in the gas market has eroded its dominance.

Europe faces slower growth; it has greater access to alternative energy sources, such as liquefied natural gas and coal; renewables are on the rise; and the EU is moving to make the market more liquid with new regulation and infrastructure.

Furthermore, U.S. and EU sanctions over Russia’s role in the Ukraine crisis have curtailed Gazprom’s investment plans.

“The market has turned into the buyer’s market,” one senior Gazprom source told Reuters.

However, another Gazprom source said the regulatory pressure has helped the gas giant become more competitive and grab a bigger market share.

“Without this probe, we would still be selling gas in Europe at old pricing rules and our share would be shrinking,” a senior Gazprom executive told Reuters.

Failure to live up to its promises could still earn Gazprom a fine over the next eight years. By the time the deal expires, Vestager predicted changes in Europe’s gas market will have broken Gazprom’s hold on the market.

“In eight years time we will have another gas market,” she said.

Additional reporting by Andrius Sytas in Vilnius, Agnieszka Barteczko in Warsaw and Dmitry Zhdannikov in London; Editing by Adrian Croft