European Commission Accuses Gazprom of Hindering Competition in Eight EU Countries

Strategic Insights -

The European Commission (EC) has formally accused Russia's state-controlled gas giant Gazprom of pursuing an overall strategy to partition Central and Eastern European gas markets, hindering competition in eight EU countries: Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, and Slovakia. The EC's statement of objections, a formal step in antitrust investigations, alleges that Gazprom has abused its dominant market position by imposing territorial restrictions, making gas supplies conditional on unrelated commitments, and charging unfair prices. EC Commissioner Margrethe Vestager has expressed concern that Gazprom's behavior may have built artificial barriers preventing gas from flowing between countries, hindering cross-border competition and resulting in higher gas prices.

Key Takeaways:

  • Gazprom is accused of hindering competition in the gas supply markets in eight EU countries, including Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, and Slovakia.
  • The EC's preliminary view is that Gazprom implemented an overall abusive strategy in these gas supply markets, including imposing territorial restrictions and destination clauses in supply agreements.
  • Gazprom may have also used other measures to prevent cross-border flow of gas, such as obliging wholesalers to obtain its approval for exporting gas and refusing to change the delivery location.
  • The Commission finds that these measures may have resulted in higher gas prices and allowed Gazprom to pursue an unfair pricing policy in five EU countries.
  • The EC's statement of objections alleges that Gazprom's price formulae indexed gas prices to a basket of oil product prices, favoring the company over its customers.
  • Gazprom may be leveraging its dominant market position by making gas supplies to Bulgaria and Poland conditional on obtaining unrelated commitments from wholesalers concerning gas transport infrastructure.
  • The EC's provisional findings suggest that Gazprom's practices constitute an abuse of its dominant market position prohibited by Article 102 of the EU Treaty on the Functioning of the European Union.
  • If confirmed, Gazprom's behavior may impede the cross-border sale of gas within the Single Market, lowering market liquidity and efficiency, and raising artificial barriers to trade between member states.

Statistics:

  • Eight EU countries have been accused of hindering competition by Gazprom: Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, and Slovakia.
  • Gazprom's market share is well above 50% in most of these countries and up to 100% in some countries.
  • The EC's preliminary view suggests that Gazprom's overall strategy has resulted in unfair prices for wholesalers in five EU countries (Bulgaria, Estonia, Latvia, Lithuania, and Poland).
  • The Commission finds that Gazprom's practices may have resulted in higher gas prices and artificially divided gas markets in Central and Eastern Europe.

Sources:

  • European Commission (EC) - "Statement of Objections: Gazprom" (April 22, 2015)
  • European Commission (EC) - Factsheet: "Gazprom" (April 22, 2015)
  • EC Commissioner Margrethe Vestager's statement (April 22, 2015)