OGZPY PJSC Gazprom (PK)

By Emre Peker and Natalia Drozdiak 

BRUSSELS -- The European Union settled its multiyear antitrust case against PAO Gazprom on Thursday, clinching promises of cheaper and freer natural-gas flows from Russia as President Donald Trump demands that the bloc taps U.S. energy exports and cuts its dependence on Moscow.

Gazprom pledged to set gas prices in line with open Western European markets, allow clients to more frequently ask for price revisions and remove restrictions on reselling gas across borders, according to the European Commission, the EU's executive body.

In exchange, the Russian state-owned energy giant was able to avoid billions of dollars in penalties.

The EU's measures drew fire from some member countries and risked stoking trans-Atlantic tensions by widening bilateral clashes on issues ranging from trade to foreign policy. The settlement contrasts with billion-dollar antitrust fines levied against U.S. tech companies including Alphabet Inc.'s Google and Qualcomm Inc., as Mr. Trump slams the EU for what he calls the Europe's unfair treatment of the U.S.

"This case is not about the flag of the company -- it is about achieving the outcome that best serves European consumers and businesses," said EU antitrust chief Margrethe Vestager.

Gazprom will "significantly change" the way it operates, she added, preventing it from squeezing former Soviet Union states and satellites, Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland and Slovakia with higher prices.

The company would face a fine as high as 10% of its annual revenue if it reneges on its promises.

"Today's decision puts an end to this behavior by Gazprom," Ms. Vestager said. "I know that some would have liked to see us fine Gazprom instead, no matter the solution on the table."

The company has already made some of those changes of its own volition in response to customer pressure, to safeguard a major source of Russian state revenues, according to EU diplomats, energy industry executives and analysts.

Coupled with the commission's settlement, that is allowing Gazprom to evade punishment, critics of the deal said.

"They are getting away with it," an EU diplomat said. There are "practically no change of practices -- just minor adjustments."

Poland's EU Affairs Minister Konrad Szymański told the Polish Press Agency on Tuesday that the bloc had veered off its usual antitrust approach and missed the opportunity for a "fair and well-justified" ruling including a "considerable fine."

An antitrust fine would also have strengthened European rivals' ability to claim damages in court, while the settlement makes any legal action harder.

Gazprom had already agreed to a set of commitments to settle the case in 2017, but negotiated tweaks to address reservations by EU complainants and competitors following a market test.

"We believe that today's decision is the most reasonable outcome for the well-functioning of the entire European gas market," said Alexander Medvedev, Gazprom's deputy chairman. "We are satisfied."

The EU's bid to maintain its energy links to Russia threatens to undermine its bid to woo the Trump administration, as it negotiates waivers from U.S. steel and aluminum tariffs.

Mr. Trump granted temporary exemptions to Europe, expiring June 1, while leveling demands including lower levies on American goods in exchange for waivers. Recently, he upped the ante by also pressuring Germany to scuttle Gazprom's Baltic Sea pipeline to Russia -- Nord Stream 2 -- and buy liquefied natural-gas from the U.S. to meet its energy demands.

EU leaders signaled their willingness to pave the way for U.S. LNG purchases last week, saying that while they wouldn't negotiate under threat, they would be open to boosting energy cooperation if Mr. Trump waives his metals tariffs for the bloc.

"We would like to import more LNG from the United States -- but this is not at all case-related, this is much more related to our ambition to diversify energy imports," Ms. Vestager said.

The U.S. push against Russian gas exports may find support from some EU members, led by Poland. The bloc's Eastern European members have repeatedly clashed with Nord Stream 2 backers -- particularly Berlin -- for undermining EU security in exchange for safeguarding national energy supplies.

Breaking Gazprom's stronghold in the EU will be difficult regardless of U.S. talks, the fate of Nord Stream 2 and despite the company's commitments to avoid antitrust fines. Russian gas exports to the EU are hovering near record highs and supply about a third of the bloc's annual gas demand.

"Russia will continue to play a key role," said Simone Tagliapietra, an energy analyst at Brussels-based think tank Bruegel. "Its gas is considerably cheaper than all other existing alternatives."

Write to Emre Peker at emre.peker@wsj.com and Natalia Drozdiak at natalia.drozdiak@wsj.com

(END) Dow Jones Newswires

May 24, 2018 13:12 ET (17:12 GMT)

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