EU Investigates Gazprom
The European Commission began a formal investigation into Russian energy giant Gazprom, it announced September 4. Russia supplies over a third of the European Union’s natural gas, with some countries relying completely on Gazprom.
The Russian government owns a 51 percent stake in the company and it often uses gas supplies to get what it wants from dependent nations.
The Commission will investigate whether Gazprom is holding back competition in gas markets in Central and Eastern Europe. It says Gazprom may be trying to stop its customers from finding alternative sources and burdening them with unfair prices. It could give Gazprom a fine of up to 10 percent of its global revenue, if it finds the company guilty.
The Commission ordered raids on Gazprom offices in 10 EU countries last year to gather evidence of anti-competitive practices.
The investigation is part of an on-and-off tussle with Russia over gas supplies that goes back years. Europe has made several attempts to lessen its dependence on Russian energy, fearful of Russia’s ability to use that dependence as a weapon. But Russia has thwarted these attempts by luring key European nations away from anti-Russian solidarity with lucrative energy deals.
Nonetheless, Europe appears to have quietly gained the upper hand—diversifying its gas supplies and tilting the balance of power in its favor. Credit Suisse forecasts that Gazprom’s exports to Europe in 2012 could be 18 percent lower than their peak in 2007.
Now Europe seem to be pressing home that advantage, with apparently perfect timing. As Stratfor, the Wall Street Journal and the Financial Times pointed out this week, Gazprom is also coming under increasing pressure within Russia.
Last year, Germany closed all its nuclear power plants made before 1981, and announced plans to phase out all nuclear power by 2022. This seemed to give Russia another energy advantage. But instead of building new gas power planets as expected, Germany seems set to replace the lost energy with coal. It’s even persuaded the Green Party to support coal power—the most highly polluting form of electricity generation.
After a few quiet years, the gas war between Russia and Europe could be back on. But this time Europe has changed tactics. Russia has successfully blocked Europe from building pipelines to Central Asian countries outside of Russian control. Now Europe is using alternative sources such as shale gas, and alternative transport methods such as liquefied natural gas—which doesn’t need to run in pipelines—to fight back.
Calling Gazprom out on its anti-competitive practices while it is facing some financial and political trouble at home looks like the latest push in this battle over vital resources.
Keep an eye on this fight. Competition with Russia will play a key role in forcing European nations to unite.