Kremlin shields Gazprom from EU probe

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Kremlin shields Gazprom from EU probe
Published 12-09-2012, 09:35
The Kremlin has moved to shield Gazprom from an EU anti-monopoly investigation in a deepening standoff over gas prices, warning that Russia will not co-operate with any actions deemed to be against its interests. 

A decree signed on Tuesday by Vladimir Putin, president, aims to protect "strategic” companies operating abroad, demanding that any foreign organisation requesting information, assets or changes to contracts from strategically important companies must first seek permission from the Russian government.

In a sabre-rattling briefing that followed the decree, Gazprom said the decree would block any demands by foreign parties for discounts to contracts or disclosure of contractual agreements if this was deemed to be against Russia’s economic interests.

The state-controlled gas export monopoly accused the European Commission of using the anti-trust probe it launched last week to force the company to cut prices and unravel the formula, linked to the oil price, that governs its supply contracts to Europe, where it delivers about 25 per cent of the continent’s gas needs.

"The actions of the European Commission ... can only be seen as an attempt by the [commission] to pressure Gazpromand influence prices and the results of commercial negotiations, which is clearly in breach of market principles,” said Gazprom spokesman Sergei Kupriyanov.

"Right now a series of relatively weak EU economies are continuing to demand from Gazprom unilateral concessions on gas prices. You can’t view this as anything other than EC support for Gazprom subsidies to eastern Europe. This is an attempt to solve the economic problems of the EC at Russia’s cost.”

Mr Kupriyanov added: "Gazprom in the future will base its work on long-term contracts tied to an oil price basket.”

Alexei Miller, Gazprom’s chief executive, said late on Tuesday that the decree would prevent Germany’s RWE, Poland’s PGNIG and Lithuania from negotiating any discounts to supply contracts with the Russian gas group, adding they would have to approach the Russian government instead. "There is no need for them to turn to us anymore,” he told Interfax, the Russian news agency.

The commission’s investigation into whether Gazprom is abusing its position as the dominant supplier to central and eastern Europe comes at a time when the Russian gas group is facing demands that it recalibrate its long-term, oil price-linked supply contracts and lower prices in line with the so-called "hub price” governing alternative supplies.

Joaquín Almunia, the EU’s competition chief, said on Tuesday that Gazprom’s long-term contracts may no longer be justified because of the emergence of a spot market for gas and increased supplies of shale gas.

The Russian gas group’s position in Europe has come under mounting pressure in the last few years since a stream of alternative new supplies of liquefied natural gas have come on line, while a shale gas boom in the US has further brought hub prices down. Already this year, Gazprom has agreed to renegotiate a series of contracts with major consumers in western Europe – but so far only for one year – while it has refused to bow to similar demands from customers in central and eastern Europe where it is the dominant supplier.

The commission said last week it was investigating whether Gazprom was hindering the free flow of gas across the EU and imposing unfair prices on its customers by linking the cost of gas to oil prices.

A spokesman for Mr Almunia declined to comment on the proposed law, in a sign that Brussels did not want to enter into a public fight with Moscow.

While sending a forceful message, the Russian legal changes are unlikely to have an immediate impact on the EU investigation or its ability to obtain the information it requires. Even if Gazprom refuses to comply with future requests for information, the investigators have already collected a great deal of material and have access to all Gazprom’s partners and competitors in Europe.

Jonathan Stern, director of gas research at the Oxford Institute of Energy Studies, said the growing standoff was "deeply unfortunate” at a time "when everyone understands there is a major problem with Gazprom’s contracts”.

"There is a real battle of perceptions between a large majority of the EU who believe the only future is for hub priced contracts and Russia, which believes it must maintain the oil link.”

Mr Kupriyanov also warned that the gas giant could speed up plans to sell more gas to Asia and said it was forging ahead with an agreement to build a new liquefied natural gas plant at Vladivostok in Russia’s far east.

In Brussels, the commission has sought to portray the case as a purely legal exercise driven by the dictates of its competition law. But people close to Gazprom have viewed that thinking as naive. Speaking of Tuesday’s developments in Moscow, one said: "It’s a message to Brussels that this has a direct impact on Russia, and you have to take that into account.”

Russia has been seeking – so far unsuccessfully – to move the case from the competition lawyers at the commission to higher political levels, presumably in hopes of working out a settlement.

They view the investigation as part of a larger series of conflicts with Brussels regarding the implementation of the EU’s new energy liberalisation legislation. Moscow, has complained about Lithuania’s efforts to use that legislation to force Gazprom to dump its stake in the local gas company. They have also sought exemptions from EU laws that require pipeline owners to provide access to third parties and publish transparent rate schedules.


Financial Times

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