Antitrust investigation of the European Commission against “Gazprom” closed

BRUSSELS, may 24. /TASS/. The European Commission (EC) and “Gazprom” reached an amicable agreement on closing the Antimonopoly case against Russian company without penalty. In exchange “Gazprom” has undertaken a number of legal obligations to change its business model in the EU for eight years. In case of failure of “Gazprom” terms of the transaction, the EC has reserved the right to impose a penalty of up to 10% of its global turnover, in other words it can reach $10 billion.

“The European Commission and Gazprom have reached an international agreement to close the matter without fines, – said Thursday at a press conference in Brussels, the European Commissioner for competition Margrethe Vestager. – If the company violates any of the obligations, the EC can impose a fine of up to 10% of global turnover without having to re-prove violation of EU rules. We see that Gazprom gradually, gradually already started to amend their contracts with European consumers, and that’s what matters to us”.

Eight years of commitments

According to Vestager, the obligation of Gazprom will be legally binding for eight years. She reported that the Russian company has agreed on the free resale of its gas between EU countries, as well as for inclusion in contracts, the introduction of correction mechanisms in gas prices for countries of Central and Eastern Europe, to match the level of market prices, taking into account hubs LNG (liquefied natural gas – approx. TASS), where, however, in recent years, prices remain consistently above Gazprom in Western Europe.

In addition, Gazprom has pledged to abandon the “abuse of a dominant position in the EU to gain control over the gas infrastructure,” and “claims for compensation from Bulgaria for the failure of the “South stream”, said the Commissioner.

Vestager stressed that the Gazprom’s clients in Europe will have the right for 120 days to review gas prices to ensure their competitive level. If a price change happens, can be assigned to an independent external agent that defines the “competitive level of prices for a particular case.”

Game commissioners

Explaining why obligations of “Gazprom” has defined it for eight years, Vestager said that in this period of time in Europe will be “a completely different energy.” According to her, by the time you have completed creating the Energy Union, formed a competitive gas market, as well as increased role of alternative sources of energy.

However, there is a more prosaic version, which explains this term. At the end of next year the mandate of the current composition of the European Commission headed by Jean-Claude Juncker. He has already announced that it will not even nominate his candidacy for a second term. In this case Vestager is one of the most realistic candidates to head the European Commission following composition – in the years 2019-2024.

Thus, the agreement with “Gazprom” completely covers this period and the two years following the term of the European Commission (2024-2029 years), that completely eliminates the need to return to these negotiations in preparation of a future agreement for the Board of commissioners for possible leadership Vestager.

The free flow of gas

The European Commission’s decision to eliminate obstacles to the free flow of gas to Europe and creates an individual set of rules, which must be subject to “Gazprom”, said Vestager. The “personality” of these rules, the European Commission, explains some unique approach to the Russian company, and the fact that the company itself is a unique player in the European gas market and will retain its dominant position in the foreseeable future.

“All companies doing business in Europe must comply with European competition rules, regardless of which country they come from. Today’s decision removes obstacles created by Gazprom, which stand in the way of the free flow of gas in Central and Eastern Europe. Moreover, our solution provides a customized set of rules for future behavior of “Gazprom”, – said the Commissioner.

According to her, the decision of the EC “oblige “Gazprom” to take positive steps to further integrate gas markets in the region and to help create a real internal energy market in Europe.” “And it gives the clients of “Gazprom” in Central and Eastern Europe, an effective tool in order to make sure that the price they are paying is competitive, he said. – As always it is not about the flag, but about achieving results that best serve European consumers and businesses. And it does not stop at today’s decision – rather, today begins the performance of the obligations of “Gazprom”.

“Gazprom” is satisfied

“Gazprom” considers the European Commission adopted the decision of the most acceptable outcome.

“We are pleased with the decision on the settlement of the antitrust investigation, which was announced by the European Commission. We always confirmed the intention to cooperate in good faith with the aim of finding a mutually acceptable solution within the framework of established procedures. We are convinced that today’s decision is the most acceptable outcome for the functioning of the European gas market as a whole”, – said the Deputy Chairman of the Board of PJSC “Gazprom” Alexander Medvedev.

Gazprom has always complied with the applicable provisions of the competition law of the EU and reaffirms its commitment to comply with them in the future,” he said.

Ukraine is innocent

At a press conference Vestager answered the questions of journalists about the fact that the settlement agreement might suffer a transit country for Russian gas – Ukraine, stressing that Kyiv to this case is irrelevant, and Ukraine liabilities of “Gazprom” do not apply.

“Ukraine is outside of our jurisdiction, it is the [investigation and agreement] has nothing,” said Vestager.

Unlike the trilateral talks (Russia – EU – Ukraine) on the transit and supply of gas via the territory of Ukraine, which leads gendirektora of the Commission for energy and is patronized by the Deputy head of the EC on the Energy Union Maros Sefcovic, the Antimonopoly investigation of Gazprom in Central and Eastern Europe was engaged in another Department of the European Commission – gendirektora competition, under the control Vestager.

“Persons who consider themselves affected by the action “Gazprom” in Central and Eastern Europe, can turn to national courts, which, according to the decision of the European court of justice, have the authority to make decisions in this area,” she said.

“Victory for common sense”

In the case of the EC against “Gazprom” it is impossible to speak of the victory of Moscow or Brussels – there victory for common sense. This opinion was expressed to the correspondent of TASS on Thursday in Brussels the expert close to the EC. “It really reached a very balanced solution and do not look for the victory of Moscow or Brussels is a victory for common sense”, – said the Agency interlocutor. The European expert also noted that both sides went into serious concessions when it came to compromise in reaching their strategic goals.

“For the European Commission to reject even from the nominal fine against Gazprom is a serious political risk. It falls now under fire for the apparent weakness on the part of state and non-state players – opponents of Russian companies, but also from the lobbyists of big us digital giants like Google, Microsoft, Apple or Amazon, which the Commissioner Vestager previously “prescribed” fines in the billions of dollars for violations of EU competition,” he said.

“At the same time, “Gazprom” went to a number of legally binding commitments to changes in their contracts with European companies, which will lead to significant changes in the European business model of the company. It is, for example, to provide European customers the right to resell purchased from “Gazprom” gas. This step will greatly facilitate the completion of the internal European gas market. Another important step of the holding became a waiver of judicial compensation from Bulgaria for the failure (in fact, at the request of the European Commission – approx. TASS) construction of the “South stream”, – he added.

Thus, according to the expert, the European Commission has received something for which there are antitrust rules EU: “the commitment of the company’s monopoly to play by competitive rules.” In turn, “Gazprom” “has not only maintained its business in Europe, but also ensured the preservation of the position of the dominant gas supplier to the EU, while avoiding the Board for their past sins.”

Antitrust investigation

In 2012 the EC at the request of the Eastern European countries of the EU started an investigation against “Gazprom” in connection with the prosecution of the Russian company of abusing a leading position in the gas markets of Central and Eastern Europe and the establishment of unfair prices. In 2015, the Russian gas holding was made official notification of claims.

The European Commission argued that Gazprom is abusing its monopoly position in eight EU countries: Estonia, Hungary, Bulgaria, Czech Republic, Latvia, Lithuania, Poland and Slovakia. The EC suggested that the company used its dominant position to exert pressure on the EU in the framework of the creation of gas infrastructure in Poland (the Yamal pipeline) and Bulgaria (South stream).

The EC also expressed the opinion that “Gazprom” established in five EU countries much higher gas prices, which are sometimes 40% higher than rates for other member States of the European common market. In the same letter, with the list of europeanthe Vestager noted that the formula for pricing of “Gazprom” to oil is not in line with European standards, despite the fact that this model is widely used in the European gas industry.

In the fall of 2015 the EC and Gazprom have started the technical consultations on the matter.