*Check against deliery*
I am here to talk to you about the next step in our antitrust investigation into Gazprom’s business practices.
This case is about putting an end to Gazprom’s actions, which may have prevented the free flow of gas in Central and Eastern Europe at competitive prices.
It could benefit millions of Europeans that rely on gas to keep their homes warm. And businesses that use gas to heat their premises or for production.
Today, we are inviting stakeholders to comment on a set of commitments offered by Gazprom.
Gazprom has submitted these commitments in response to the concerns set out in the Commission’s Statement of Objections. The allegation was that Gazprom pursued an overall strategy to partition Central and Eastern European gas markets, in breach of EU rules.
EU rules apply to all companies that operate in the European market – no matter if they are European or not. Gazprom is welcome to sell its gas in Europe but it has to follow EU rules, including our competition rules.
Gazprom’s offer of commitments confirms this. We think they provide a forward looking solution to fix the issues we’ve found – and help to better integrate gas markets in the region.
So, how do the commitments address our three competition concerns?
The first competition concern is that Gazprom has partitioned the market along national borders. In contracts with customers in eight countries it imposed territorial restrictions to re-selling gas. These are Bulgaria, the Czech Republic, Estonia, Latvia, Lithuania, Poland, Hungary and Slovakia.
Gazprom has now offered to remove all provisions in its contracts with customers that prohibit them from re-selling gas across EU borders. In addition, it will remove all provisions that reduce the incentives of customers to re-sell gas, such as clauses that give Gazprom a share of the profit. Gazprom’s commitment extends also to future contracts.
So, as a customer, once you have bought and paid for the gas, it is for you to decide what happens to it, not Gazprom.
At the same time, your ability as a customer to ship gas across borders of course depends on the access to gas infrastructure. Some regions in Central and Eastern Europe lack access to such interconnections with their EU neighbours, in particular Bulgaria and the Baltic States.
Gazprom has offered to take positive steps to further integrate these gas markets, which address our competition concerns:
- Gazprom will deliver gas to Bulgaria or the Baltic States at a fixed transparent fee. Relevant customers that have bought gas originally to be delivered to Hungary, Poland and Slovakia, can re-sell their gas. They can have it delivered to Bulgaria or the Baltic States instead. This allows these customers to seek new business opportunities even before connecting gas infrastructure becomes available, to the benefit of Bulgaria and the Baltic States.
- Gazprom will adapt its gas contracts to remove obstacles to cross-border gas flows to Bulgaria. These changes would enable better gas interconnections between Bulgaria and its EU neighbours, in particular with Greece.
Combined, we think these measures are important improvements to ensure the free flow of gas in Central and Eastern Europe.
Our second competition concern is about prices. The re-sale restrictions I just mentioned have contributed to isolating each national market. As a result of this, Gazprom may have been able to charge excessive gas prices in Bulgaria, Estonia, Latvia, Lithuania and Poland.
Gazprom’s commitments will link gas prices in these countries to competitive benchmarks. This means that customers will be able to ask for their gas price to be renegotiated, if it diverges from competitive price benchmarks, such as liquid hub prices. Gazprom will amend its contracts with customers to add this right.
This does not mean that all prices throughout Europe will be the same. But gas prices in these regions will be closer linked to prices that are formed in parts of the EU where other sources of gas are available, for instance at liquid hubs. This would ensure that gas prices in these regions will be competitive.
Finally, our third competition concern is that Gazprom should not take advantage of its dominant market position on the gas supply market to obtain rights relating to the access to or control of gas infrastructure. The Statement of Objections raised concerns in relation to the South Stream project in Bulgaria and the Yamal pipeline in Poland.
As regards South Stream, Gazprom has committed not to seek damages from its Bulgarian partners following the termination of the South Stream project. This means that Gazprom’s conditioning of gas supplies won’t have any effect in practice.
As regards the Yamal Pipeline, the Commission’s investigation has shown that the situation cannot be changed by this antitrust procedure. This is due to the impact of an intergovernmental agreement between Poland and Russia.
For future international agreements, the Commission (led by my colleagues Miguel Arias Cañete and Maroš Šefčovič) has put forward a legislative proposal. We want to make intergovernmental agreements subject to prior scrutiny by the Commission and be able to flag potential concerns at that point in time. This proposal has just been adopted by the European Parliament and is now pending with the Council.
It also shows that effective competition in Central and Eastern European gas markets of course cannot be achieved by the enforcement of EU competition rules alone. It also depends on how much you invest into gas supply diversification. As well as, of course, on well-targeted European and national energy legislation and their proper implementation.
What antitrust enforcement can do is remove contractual barriers to the free flow of gas and avoid excessive prices.
We think that Gazprom’s commitments do that. They address all of the Commission’s outstanding competition concerns in the case and provide a clear framework for Gazprom’s future conduct.
As always, our goal in competition cases is to find the best way to protect consumers. Therefore, before deciding on whether to accept these commitments, we now want to hear the views of all interested parties. Customers will have seven weeks to submit their comments, from the time the commitments are officially published.
We will then carefully assess all comments received. If they show that the commitments are not suitable, then of course we will not accept them.
If, on the other hand, we do accept them, they will be legally binding. This means that if Gazprom does not do what it has promised, we can fine the company up to 10% of its worldwide turnover without having to prove that they were breaking EU competition rules.
That is not just a theoretical possibility. Four years ago, when Microsoft broke its commitments on choice of web browsers, they were fined more than half a billion euros.
To conclude, this is not the end of the story. But it is a promising moment. We now have proposals for commitments that could help people in Central and Eastern Europe to save money on heating bills and ensure the free flow of gas across borders. Once we’ve had feedback from everyone interested, we’ll decide on our next step.