Brussels prepares to unleash antitrust charges against Gazprom

Christian Oliver in Bruges and Alex Barker in Luxembourg

Brussels is preparing to accuse Russia's energy giant Gazprom of illegal abuse of its dominant position in Europe's gas market, unleashing antitrust charges that could further inflame already poisonous relations with Moscow.

Just a week after confronting Google over its market power, Margrethe Vestager, the EU competition chief, is pressing forward with a longstanding Gazprom case all but frozen by the Ukraine crisis, according to two people familiar with the situation.

A view of the Russian gas giant Gazprom's recently built Adler thermal power plant in the Russian Black Sea resort of Sochi.
Yuri Kadobnov | AFP | Getty Images

The decision to send a formal statement of objections, which could come as soon as Wednesday, is a big gamble for the European Commission. It has always insisted it is treating Gazprom as it would any other company operating in Europe, in spite of the geopolitical implications such a case could have. Russia sees the probe as a political weapon.

Since launching the biggest antitrust raids ever mounted in Europe in 2011, the commission has honed a case around concerns that focus on whether the Russian company was thwarting competition and pushing up prices in central and eastern Europe.

Although the charge sheet has been ready since last year, Brussels held off amid fears that it could antagonise an increasingly belligerent Moscow and prompt a response — such as a gas cut-off — that dwarfed the overcharging issues the commission is attempting to address.

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Some people familiar with the case think Ms Vestager may seek to narrow the focus of the investigation, as she did in the charge sheet sent against Google last week.

Ms Vestager is expected to announce the decision on Wednesday. The commission declined to comment.

Gazprom told the commission earlier this month that it wanted to renew settlement talks, which made limited progress before coming to a halt last year as the Ukraine crisis erupted.

Given its interest in reaching an accord over the concerns, any decision to unveil charges is likely to be seen by Moscow as a provocation. Some diplomats fear the move is out of step with the EU's efforts to build on some signs of progress in Ukraine that followed the Minsk ceasefire accord.

As the EU's top competition authority, the commission has the power to levy fines of up to 10 per cent of Gazprom's global turnover and impose changes to its business model. Once a statement of objections is sent, Gazprom is given 10 weeks to respond and can call a hearing to make its defence. It would still be able to settle the charges.

Ms Vestager has previously made clear that she sees the Gazprom case as a commercial matter unrelated to politics. She told a Washington audience last week that "consistent enforcement" of the competition rules was vital for Europe's hopes of building an energy union.

"Acting decisively against energy companies that harm rivals, block energy flows from one EU country to another, or threaten to close the tap can help deter others," she said.

There are three main pillars to the Brussels investigation: that Gazprom abused its market dominance in eastern Europe to overcharge, restrict the resale of its gas and block rival sources of supply.

One particular area of concern is the big price differences seen in Gazprom contracts, which link its gas prices to the price of crude oil in long-term supply contracts.

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