ASSESSMENTS

EU Antitrust Probe Could Weaken Russian Energy Dominance

Sep 7, 2012 | 11:00 GMT

EU Antitrust Probe Could Weaken Russian Energy Dominance
Russian President Vladimir Putin (R) with Gazprom CEO Alexei Miller

ALEXEY DRUZHININ/AFP/Getty Images

Summary

The European Commission on Sept. 5 announced the launch of a formal antitrust investigation into Russian state-owned energy firm Gazprom, which has allegedly engaged in monopolistic practices in natural gas markets in Central and Eastern Europe. Under EU rules, Gazprom could face steep fines if found guilty. The investigation is a continuation of the European Union's ongoing efforts to liberalize its natural gas markets and reduce European dependency on Russian energy.

The probe has been characterized in the media as a major escalation in the multi-year conflict between the European Union and Russia over Gazprom's business practices. In reality, the Kremlin has become more flexible about pricing and bundling issues in recent years to retain its market share in Western Europe, and the European Commission cannot antagonize Moscow to the point of threatening EU access to Russian natural gas. Thus, rather than punishing Gazprom, Brussels is trying to encourage Russia to become more accommodating in natural gas negotiations with EU countries in Central and Eastern Europe. And while Russia's public response to the antitrust probe might be combative, the Commission and the Kremlin likely will reach a deal behind the scenes.

Brussels is attempting to give Central and Eastern European countries negotiating leverage over natural gas prices. ...

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