EU says Gazprom offer to avoid antitrust fines allays worries

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By Alissa de Carbonnel | BRUSSELS

BRUSSELS EU antitrust regulators said on Monday
concessions by Russia’s Gazprom aimed at avoiding
fines should allay concerns of market abuse, signalling a thaw
in business ties between Moscow and Brussels despite tensions
over Ukraine and Syria.

The provisional deal, which is subject to feedback from some
EU states and market players, moves closer to ending one of
Brussels’ longest-running antitrust probes that began with raids
on offices in 10 countries in 2011 and culminated in charges
Gazprom, which supplies a third of the EU’s gas, had abused its
dominant position.

If the deal comes into force, Russia’s state gas exporter
will escape fines of up to 10 percent of its global turnover –
an outcome likely to anger Poland and eastern EU countries which
have sought a tougher line from Brussels.

Eight member states in the east at the centre of the case,
all formerly dominated by Moscow, now have until May 4 to object
to the European Commission’s view and could seek changes in the
deal.

Europe’s Competition Commissioner Margrethe Vestager, who
has brought actions and levied fines against major
multinationals such as Google, said Gazprom’s offer
met concerns and provided “a forward looking solution”.

“Combined, we think that these measures are important
improvements to ensure the free flow of gas at competitive
prices,” Vestager said

The legally-binding deal would entail Gazprom bowing to EU
conditions to do away with terms barring countries from
exporting its gas to other countries; tying contracts to
investments in pipelines; and monopoly pricing in the three
Baltic states, Bulgaria and Poland.

The fight over pricing and destination clauses have been the
toughest issues in high-level talks between Vestager and Russian
officials that have dragged on for years to find a compromise.

As part of the deal, Gazprom pledged greater transparency on
prices. It will allow clients to renegotiate decades-long,
oil-indexed contracts – opposed by the Commission. Prices would
be linked to benchmarks such as European gas market hubs and
border prices, including in Germany.

Gazprom deputy head Alexander Medvedev said in a statement
the commitments “demonstrate our willingness” to soothe the
concerns of EU regulators and to closing the case soon.

‘APPEASE RATHER THAN CONFRONT’

Within a bloc divided over its stance on Russia, some EU
nations see the move towards a settlement as running counter to
calls for more sanctions on Russia over its bombing in Syria.

“The fundamental question is how friendly are we going to be
with Gazprom,” one senior EU diplomat said, voicing dismay that
Vestager had chosen to fine Google but not Gazprom.

Vestager said during a news conference that her view was
purely based on enforcing EU law and not influenced by politics.

With a settlement, Russia would accept EU authority in
applying competition law – something it has long balked at.

If Gazprom fails to comply, the EU could resort to fines
without reopening its case as it did when it imposed a 561
million euros ($731 million) penalty on Microsoft for breaking
its promises.

One EU official described the attitude in Brussels as “it’s
better to appease than confront” its eastern neighbour.

But EU officials said they were bracing for tough feedback
from some nations, with Poland already locked in a court battle
with the Commission over what it views as lenient treatment of
Gazprom in another case.

In the so-called “market test”, Gazprom’s competitors and
governments in Poland, the three Baltic states, Bulgaria,
Hungary, Slovakia and the Czech Republic have the right to weigh
in. They will have seven weeks, almost twice the normal time, in
part due to elections in Bulgaria, officials said.

In recent years, Gazprom has changed some of its more
contentious behaviour under pressure from increased competition
from liquefied natural gas imports, price arbitration cases
brought by western customers and more liquidity on Europe’s
energy markets.

But EU regulators say those do not extend to the region,
where some countries are almost 100 percent dependent on Russian
gas imports.

In addition to the antitrust case, the Commission has
proposed legislation that will allow Brussels to vet bilateral
energy deals between EU nations and countries such as Russia –
as such agreements are not covered by competition law.

That is why EU regulators said they had no power to tackle
disagreements over the Yamal pipeline between Russia and Poland.

However, Gazprom has offered not to seek damages from
Bulgarian partners over the cancellation of the planned South
Stream pipeline under the Black Sea.



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