Gazprom Attempts to Settle EU Antitrust Case
September 21 2015 - 1:20PM
Dow Jones News
BRUSSELS—OAO Gazprom said Monday it has submitted proposals to
the European Commission to settle accusations that the Russian
energy giant hindered competition and charged unfair prices in
several eastern European countries.
If accepted, a settlement could help the company avoid
billion-dollar fines, but would likely require it to fundamentally
change the way it has done business in its former backyard since
the collapse of the Soviet Union.
The commission in April filed formal charges against Gazprom,
saying the state-controlled company broke European Union antitrust
law in eight countries where it is the dominant gas
supplier—Bulgaria, the Czech Republic, Estonia, Hungary, Latvia,
Lithuania, Poland and Slovakia. The commission, which acts as the
European Union's antitrust watchdog, said restrictive terms in
Gazprom contracts forced territorial constraints on customer, for
instance by prohibiting them from re-exporting gas to another
country.
It also attacked Gazprom's practice of trying the price of gas
to that of oil, saying that had led to higher gas prices in
Bulgaria, Estonia, Latvia, Lithuania and Poland to those charged in
other markets. Finally, the commission said that in Bulgaria and
Poland the company had also tied the supply of gas to government
support for big pipeline projects such as the Yamal-Europe pipeline
now canceled South Stream project.
Gazprom has consistently rejected the charges as politically
motivated—a claim the commission has denied. In recent months in
particular the company has pointed out that customers whose
contracts are tied to the price of oil are now enjoying
exceptionally cheap gas, thanks to the collapse in global oil
prices.
Even though Gazprom has denied any wrongdoing, its management
always said it was open to a settlement.
"We hope to discuss this proposal with the representatives of
the commission in the near future in order to come to a settlement
agreement," it said Monday, without giving details on the content
of its proposals.
The commission confirmed that it received the proposal, but
added that it still expected a formal response from the company on
its charges by Sept. 28.
Monday's offer isn't the first attempt by the two sides to
resolve the case. Talks between the Gazprom and the commission on
settling the two aspects of the investigations that don't include
the oil-price link had advanced quite far by early 2014, people
familiar with the probe have said. However, settlement negotiations
collapsed in the spring of last year as the conflict between Russia
and Ukraine escalated.
A year later, the EU's new Competition Commissioner Margrethe
Vestager filed the charges.
Analysts said Monday that it was too early to say whether
settlement talks would be successful this time around.
Ms. Vestager "has shown a very strong determination to move some
cases forward," said Alec Burnside, an antitrust lawyer at
Cadwalader, Wickersham & Taft LLP in Brussels who isn't
involved in the case.
Within six months of taking office last November, the former
Danish economy minister had jump-started several long-dormant
cases, notably by filing charges against Gazprom and Google Inc. in
a single week in April. She has also taken a tough approach to
mergers that might harm consumers, pushing Scandinavian telecom
operators Telenor ASA and TeliaSonera AB to abandon the merger of
their Danish operations this month.
The EU's immediate response on Monday indicates that while the
EU is willing to engage in settlement talks, regulators aren't
"taking their foot off the pedal," Mr. Burnside said.
"This is a high-stakes game and it's difficult to separate out
antitrust from geopolitical elements, which are no doubt involved,"
Mr. Burnside said.
Write to Gabriele Steinhauser at gabriele.steinhauser@wsj.com
and Tom Fairless at tom.fairless@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
September 21, 2015 13:05 ET (17:05 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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