Wednesday, April 22, 2015

EU Antitrust Case Against Gazprom: Allow Backflow to Ukraine, Beat Back Pipeline to Greece

The New Cold War enters a potentially more dangerous phase today with the announcement (James Kanter, "E.U. Charges Russian Energy Giant Gazprom With Abusing Its Dominance") by the European Commission that it will bring antitrust charges against Russia's Gazprom:
BRUSSELS — European antitrust regulators on Wednesday charged the Russian energy giant Gazprom with abusing its dominance in natural gas markets, a move amounting to a direct challenge to the authorities in Moscow. 
The European Commission, the European Union’s executive arm, said that unfair pricing might have resulted in higher gas prices in Bulgaria, Estonia, Latvia, Lithuania and Poland, which have long been wholly or substantially dependent on Russian gas. In those countries, the commission said, Gazprom was suspected of charging wholesalers prices that were significantly higher compared with the company’s costs or to benchmark prices. 
The commission also suspects Gazprom of quashing competition by restricting gas flows to some parts of Europe. Gazprom seems to be “pursuing an overall strategy to partition Central and Eastern European gas markets, for example by reducing its customers’ ability to resell the gas cross-border,” the commission said.
The commission also said that Gazprom might have been leveraging its dominant market position in Bulgaria and Poland by making supplies of gas conditional on those countries’ participating in infrastructure plans such as building a new pipeline route to Europe under the Black Sea.
“Keeping national gas markets separate also allowed Gazprom to charge prices that we, at this stage, consider to be unfair,” said Margrethe Vestager, the European Union’s competition commissioner. 
“If our concerns were confirmed, Gazprom would have to face the legal consequences of its behavior,” she said. 
The charges make it more likely that Gazprom could eventually face a fine theoretically running higher than 10 billion euros, or about $10.7 billion. But the larger worry for Gazprom is the prospect of being forced to allow more competition in markets it has long controlled. Russia supplies about one-third of the European Union’s natural gas.

Gazprom said in a statement that it “considers the objections put forward by the European Commission to be unfounded.”
A couple points need to be made. First, Gazprom is synonymous with the rebirth of the Russian state under Putin. With the success of Gazprom you have the success of Russia with Putin at the helm. I am a believer in Russia; therefore, ten years ago, wanting to express this belief, I decided to become a shareholder in Gazprom.

Point two: Up until now, despite all the fighting in Ukraine, the destruction of the country's industrial heartland by the junta in Kiev, the myriad U.S. and EU sanctions, it has been hands off Gazprom, with a few exceptions: some financial restrictions placed on dealings with Gazprombank, a ban on the export of cutting-edge drilling technology, and the vetoing of the South Stream pipeline under the Black Sea bypassing Ukraine.

Now all that changes. James Kanter had a longer piece yesterday on the EU antitrust case, "Europe Is Expected to Bring Antitrust Charges Against Gazprom," where, even from within the standard Russophobic confines purveyed by The New York Times, he guided his readers to the end game being played here by Brussels officials -- backflow to Ukraine:
The larger worry for Gazprom would be the prospect of being forced to allow more competition in markets it has long controlled. The company, for example, could eventually have to drop conditions in its contracts that restrict those utilities’ power to share the gas with other countries. That would give individual countries more control over whether they consume all the gas themselves or sell some of it on to other countries, including Ukraine, something Gazprom has opposed.
An EU antitrust against case Gazprom has been hanging out there for years. Why now? I would imagine it has something to do with the deal Russia is negotiating with Greece on a pipeline. Russia could then forward cash to the Syriza-led government that would provide it with some much-needed leverage against the ghoulish troika.

I would also speculate that the antitrust case provides more proof that Ukraine as presently ruled by the junta in Kiev is not a viable state; many structural changes need to be engineered by the U.S./EU to make it one, and the ability for EU members to backflow Russian gas is key.


  1. I think it gets far worse in the near term. Europe has no long-term choice other than to go along with Russia or watch the EU dissolve. Consider this:

    Expect another Kiev attempt to attack Donbass very soon, which will result in the loss of more territory, around Kharkiv, Mariupol and Odessa (the last one as the central government in Kiev collapses). Soon the EU will not only have their refugee problem from North Africa, but also one from the rump state of Ukraine as well.

    1. Thanks for the tip on the Ishchenko article, Bob. I will read. I believe the war has to come home to Europe and the U.S. for this pathological Washington Consensus to start to crack apart. Maybe a default by Greece, which now seems more of a possibility than not, will hasten the crackup.