The European Commission vs. Gazprom

The European Commission vs. Gazprom: An Issue of Fair Competition or a Foreign Policy Quarrel?

In his recent paper, Nicolò Sartori examines the implications of the actions taken by the EU on Gazprom. The following are his conclusions:

The so-called antitrust clash of the decade between the European Commission and Russia’s state-run energy giant, Gazprom, is expected to affect the future of EU-Russia gas relations deeply. Should the Kremlin bow to the Commission’s authority to rule over Gazprom’s activities in Europe, the supply model that has characterized the European gas market in the past decades would radically change. Gazprom’s compliance with EU antitrust rules may lead to the establishment of a clearer business framework, paradoxically strengthening mutual confidence between the parties. Stronger EU-Russia ties would possibly limit the effects in Europe of the transformations underway in the global gas markets - particularly the growth of LNG trade. To ensure such developments, however, political dialogue between Moscow and the European capitals is needed so that the Kremlin’s strategic concerns can be harmonized with the Commission’s requests, many of which Gazprom finds extremely difficult to stomach.

If, on the contrary, Moscow decides to openly challenge the European Union, refusing to reach a settlement with the EC and ignoring the ECJ’s sentences, the ensuing clash would immediately take on a geopolitical dimension, as EU member states could not but be involved. A strategy based on gathering support from its closest allies in the EU, while engaging in a harsh legal battle with the Commission, would seriously risk undermining the stability of the EU-Russia energy relationship. Under these circumstances, any attempt by Russia’s European partners to lobby Brussels to halt the antitrust proceedings would probably fail, not least because the member states have no legal power to do that (and in any case there would not be a majority of member states willing to interfere with the Commission’s action). The collision would accelerate the transformation processes in the European gas market along different models, probably based on greater reliance on LNG and necessarily premised on a more diversified set of suppliers. However, there is no guarantee that this adjustment, which would in any case take time and money, would achieve the level of stability that the EU thinks is necessary for securing its energy supplies.

A clash with the EU would also weaken Russia’s attempt to become the world’s main energy exporter. The Kremlin is aware of the mutual benefits accruing from a stable EU-Russia gas relationship. It should put its Cold War era zero-sum game mindset aside once and for all and accept the fact that the rule of law, rather than political relations, constitutes the most solid basis for that relationship to endure and prosper in
the future. It should therefore abandon any hope that the antitrust proceeding can be stopped in other ways than by reaching a settlement with the Commission, even if this were to involve the unbundling of Gazprom’s vertically integrated structure. While Gazprom would lose its dominant position, it could still benefit from reforming its business model because it would gain more access to EU midstream and downstream markets. It is high time that the Russian leadership comes round to appreciating that playing by the rules of the EU energy sector might well be in harmony with its strategic calculations.

 For the full document, click here.