By Gabriele Steinhauser in Brussels and James Marson in Moscow
The European Union's competition regulator plans to file formal
antitrust charges against Russia's state-owned gas company OAO
Gazprom on Wednesday, a person familiar with the matter said
Monday, a step set to escalate the standoff between Europe and
Moscow.
The European Commission started a formal investigation of
Gazprom's business practices in some eastern and southern European
countries in September 2012, saying it suspected the company of
abusing its dominant position in those countries' natural-gas
supply. The bloc's competition commissioner, Margrethe Vestager,
said in February that she was ready to file formal charges against
Gazprom in a "relatively short time span."
The person familiar with the commission's case against Gazprom
said that the charge sheet, known as a statement of objections,
against the company has been put on the agenda of the commission
meeting Wednesday and that no resistance was expected. A spokesman
for Ms. Vestager declined to comment.
Gazprom spokesman Sergei Kupriyanov couldn't be reached for
comment.
Russian government and Gazprom officials have denounced the EU's
probe as politically motivated and aimed at forcing the company to
reduce its prices. Europe is Gazprom's most lucrative market, and
the company accounts for around one-third of EU gas imports, making
it the largest outside supplier. Some countries in the Baltics and
southeastern Europe rely entirely on shipments from the Russian
company.
With the planned charges, Ms. Vestager is escalating another
antitrust case against a major company in a big country just one
week after the commission filed formal charges against U.S.-based
Google Inc. The case against Gazprom could potentially result in
multibillion euro fines against the company.
The commission has tread carefully on the Gazprom case over the
past year, amid concerns that moving ahead with charges could make
it more difficult to reach a diplomatic solution with Moscow over
its actions in eastern Ukraine.
But when Ms. Vestager took office in November she said she would
take a fresh look at the investigation and not be steered by
political considerations. At the same time, progress on the Minsk
Agreement, the EU's peace plan for Ukraine, has been slow,
indicating that a resolution of the broader conflict is likely
still some time off.
When the commission opened its formal investigation into
Gazprom's practices 2 1/2 years ago, it said it was suspecting the
company of unfair behavior in three areas. Firstly, the commission
has been examining whether Gazprom is preventing some countries
from re-exporting gas they have bought from the company.
The commission has also been investigating whether Gazprom has
tied some aspects of its contract with customers--such as the price
it charges for gas--to cooperating in other business areas,
including the building of new pipelines.
And finally, the commission has been looking into Gazprom's
practice of tying the price it charges for gas to international oil
prices.
After the formal investigation was announced, Russian President
Vladimir Putin hit back with a decree preventing the company from
disclosing information to foreign regulators without government
permission. But EU investigators had already gathered materials in
a string of surprise raids on Gazprom subsidiaries and large
European national energy suppliers a year earlier.
Before talks broke down last year, shortly after Russia's
annexation of the Crimean peninsula from Ukraine, Gazprom and EU
competition regulators had come close to settling the first two
elements of the case, according to people familiar with the
investigation. A lot less progress had been made on the oil-price
link--partly because other gas companies have pursued a similar
pricing policy--and experts have questions whether the commission
would be able to build a case against Gazprom on that front.
The person familiar with the commission's case didn't say on
what parts of the investigation charges would be filed Wednesday.
Charges could be limited to just parts of the initial probe and
narrowed down from the eight countries the commission was
originally examining. That could reduce the potential fines Gazprom
would face.
By sending a formal charge sheet to Gazprom, the commission
doesn't rule out the possibility of settling--a strategy that the
company had publicly embraced before talks stopped and that would
allow it to avoid costly fines. A person familiar with Gazprom said
Monday that the company had signaled to the commission its
willingness to settle the case as recently as last week, but that
no formal talks had taken place since last year.
"There is a very strong argument [for Gazprom] to settle," said
Alan Riley, a professor at City Law School in London who
specializes in energy issues, adding that a legal decision against
the company and fines would be "pretty catastrophic from a business
point of view."
But Mr. Riley cautioned that political considerations could
prevent Gazprom, which is controlled by the Russian government,
from agreeing to an amicable solution. "Whatever way it is put, it
would be seen as some kind of climb-down" by Moscow, he said.
The commission has been working to reduce the EU's dependence on
Gazprom and Russia. Late last year, Moscow said that an EU law that
forces pipeline owners to open up their infrastructure to rival
suppliers had forced it to drop a major new transport route that
would have bypassed Ukraine.
Instead, Russia is now trying to build an alternative pipeline
via Turkey, known as Turkish Stream, and Moscow and Gazprom have
been grooming some EU governments for support. Gazprom's chief
executive, Alexei Miller, is scheduled to be in Athens on Tuesday
to meet Prime Minister Alexis Tsipras, who is currently struggling
with the rest of Europe over the terms of continued financial
aid.
Mr. Tsipras's leftist government has asked Russia for a discount
on its gas and discussed the possibility of continuing Turkish
Stream into Greece, which would give it a crucial link into EU
territory.
European customers have in recent years squeezed discounts from
Gazprom amid competition from liquefied-natural gas deliveries and
cheap American coal shipments to power producers. The recent drop
in oil prices has also been a boon for those whose contracts are
still oil-linked.
Gazprom has said that regulatory pressure in Europe is
accelerating its attempts to sell its gas in Asia. Last year,
Russia signed a long-delayed gas contract with China, although
analysts from Sberbank CIB say the projected pipeline looks
expensive, and that the company would be better off seeking another
route for deliveries.
Tom Fairless in Brussels contributed to this article.
Write to Gabriele Steinhauser at gabriele.steinhauser@wsj.com
and James Marson at james.marson@wsj.com
Access Investor Kit for Gazprom OAO
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=RU0007661625
Access Investor Kit for Gazprom OAO
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US3682872078
Subscribe to WSJ: http://online.wsj.com?mod=djnwires