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EU court upholds antitrust deal with Russian energy giant

Amid high tensions between the West and Russia, the European Union's second-highest court found nothing wrong with an antitrust deal the EU reached with Russian gas giant Gazprom over its allegedly anticompetitive practices in Eastern and Central Europe.

(CN) — A 2018 European Commission antitrust settlement that ordered Russian gas giant Gazprom to stop abusing its dominant position in Eastern and Central Europe but not pay a fine was properly negotiated, the European Union's second-highest court ruled Wednesday.

The European General Court's ruling was a win for Gazprom, a Russian state-owned gas behemoth, and comes amid high tensions between the West and Moscow over Ukraine and NATO's expansion onto Russia's borders. The ruling was not immediately available in English.

Russia's enormous gas exports to Europe feature prominently in the heated politics and military standoff between Moscow and NATO. European leaders often are forced to strike a difficult balance between their criticism of Russia and their need for Siberian gas, a stance that angers American policymakers.

In its ruling, the General Court dismissed a challenge to the settlement filed by PGNiG, a Polish state-controlled oil and gas company. The case can be appealed to the European Court of Justice, the bloc's highest court.

In 2018, the European Commission accepted Gazprom's commitments to lower gas prices it charges in Eastern and Central Europe and allow rival companies more leeway in selling its gas onto other customers.

However, the commission's antitrust enforcer, Danish politician Margrethe Vestager, drew criticism for not imposing a hefty fine on Gazprom for its allegedly anticompetitive practices. Critics contrasted how Gazprom got off without paying a penalty while Vestager was imposing massive fines against American big tech companies for their bad behavior. Gazprom could have been fined as much as 10% of its global turnover.

The antitrust settlement compelled Gazprom to make changes to how it sold its gas in Bulgaria, the Czech Republic, Estonia, Latvia, Lithuania, Hungary, Poland and Slovakia.

PGNiG charged the settlement was riddled with “procedural or substantive errors.” But the General Court dismissed those charges as baseless.

The commission's settlement followed a four-year probe into the way Gazprom sold its gas in markets that were formerly part of the Soviet bloc. The commission found Gazprom was “abusing its dominant position on the national markets for the upstream wholesale supply of gas,” the ruling said.

Gazprom's contracts limited how its gas could be sold by wholesalers and industrial clients, a system the commission alleged made it possible for Gazprom to charge “excessive prices” in Bulgaria, Estonia, Latvia, Lithuania and Poland.

The commission also charged it was wrong for Gazprom to require PGNiG to give Gazprom more control over the management of the Polish section of the Yamal pipeline, a major gas route through Poland.

In response to the commission's findings, Gazprom pledged to implement a suite of changes to its business practices. On May 24, 2018, the commission accepted Gazprom's commitments.

PGNiG complained that the commission's antitrust settlement was deeply flawed and in breach of EU laws designed to ensure the bloc's energy security is protected.

“The applicant has failed to demonstrate that the final commitments would, as such, be contrary to the energy-policy objectives or the principle of energy solidarity,” the court said in a news release.

However, the General Court judges reprimanded the commission for rebuffing a separate PGNiG complaint against the Gazprom deal and failed to respect the company's procedural rights.

PGNiG's CEO Pawel Majewski said on Twitter that the commission must now re-examine his company's complaints.

“We hope that the European Commission will take the opportunity provided by today’s judgment to take decisive action against Gazprom’s violations of competition law,” he said.

In a statement, the European Commission said it “will carefully study the judgment and reflect on possible next steps.” It declined to comment further and declined to say whether Gazprom was living up to commitments it made under the antitrust settlement.

Gazprom did not immediately reply to a request for comment.

Gazprom's gas exports and operations in Europe are the subject of legal wrangling and can be seen as a crucial part of the larger confrontation between Russia and the EU, NATO and the United States.

At the heart of the conflict is Nord Stream 2, a new gas pipeline Russia built with the support of Berlin to double the amount of gas it can transport directly to Germany across the Baltic Sea. Gazprom built the line in order to bypass other routes it uses to get gas into Europe and cross Ukraine, Poland, Belarus and other countries. Gazprom pays transit fees to those countries and Nord Stream 2 allows it more control over its gas exports.

But the Baltic Sea pipeline is vehemently opposed by the U.S. and some of Russia's most vocal critics in Europe, including Poland, Baltic nations, the United Kingdom and Germany's Greens.

After repeated delays caused by U.S. sanctions, the pipeline was completed last year but its certification by German authorities was stopped following the formation of a new German government that includes the Greens.

Although Germany's Social Democratic Chancellor Olaf Scholz supports the pipeline and seems to favor rapprochement with Russian President Vladimir Putin, his Green coalition partners are opposed to the project and are pushing to build new liquefied natural gas ports to allow Germany greater capacity to import gas from the U.S. and other gas-producing countries rather than rely so much on Russian gas.

At the same time, Poland is doing all that it can to stop the pipeline and punish Gazprom. For example, Polish antitrust authorities are seeking to fine Gazprom $7.6 billion for building the Nord Stream 2 by arguing that it hurts Polish consumers and increases Europe's dependence on Russian imports.

European Commission President Ursula von der Leyen has warned that Nord Stream 2 will be halted if Russia invades Ukraine, a move the Kremlin denies it is contemplating. The EU and U.S. are drawing up a list of potential severe sanctions they promise to impose on Russia if it invades Ukraine.

Although Russia denies it is planning an incursion despite a mass military buildup along Ukraine's borders, the rhetoric from Putin and the Kremlin warns Kyiv that it will suffer harsh consequences unless it returns to peace talks over the conflict in Donbas and provides Russians in two self-declared independent republics more autonomy.

Putin is demanding NATO withdraw troops and military hardware from Ukraine and other Eastern European nations along Russia's borders. The Kremlin also wants assurances that Ukraine and Georgia, two former Soviet republics, will not become NATO members.

Kyiv, the U.S., NATO and the EU have rejected the Kremlin's demands and funneled weapons, military advisers, funds and support to Ukraine. The tensions have led many to fear the outbreak of a major war in Europe.

Courthouse News reporter Cain Burdeau is based in the European Union.

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