MEPs call for Gazprom probe, alleging price manipulation

A group of 40 European Parliament lawmakers (MEPs) mainly from Poland and the Baltic States submitted a letter dated September 16 to the European Commission, calling for an investigation into Gazprom's alleged manipulation of European gas prices.

Citing media reports by Radio Free Europe/Radio Liberty, Deutsche Welle, Kommersant and others as evidence, the letter stated that Gazprom's actions were one of the key reasons for the surge in prices. Gazprom has avoiding booking additional transit capacity through Ukraine and Poland, the letter said. However, some analysts have attributed this to Kyiv offering poor transit terms.

The letter also referred to shut-ins at Gazprom fields in west Siberia. While some were explained by a fire at the Novy Urengoy  condensate treatment plant, MEPs said "it is not clear whether all the shut-ins were justified by that accident, and whether deliberate market manipulation was involved."

The lawmakers also said Gazprom had refused to answer calls from European consumers to guarantee extra volumes this summer to ease shortages and increase gas storage levels, even though available information shows that Gazprom has enough gas production capacity spare to meet these demands.

"All these factors allow to suspect that the record natural gas price surge in Europe in the recent weeks may be a direct result of Gazprom's deliberate market manipulation and actions aimed at intentional withholding available gas production capacities from the market in order to push gas prices up," the MEPs said. 

They said they suspected Gazprom was seeking to put pressure on Europe to allow the launch of the Nord Stream 2, even though the pipeline does not currently comply with EU rules on unbundling. The pipeline's operator is a fully-owned subsidiary of Gazprom.

"We call on the European Commission to urgently open an investigation into possible deliberate market manipulation by Gazprom and potential violation of EU competition rules, which had resulted in sufficiently higher energy bills for the European consumers," the MEPs said.

Analysts have also pointed to shortcomings in European energy policy as a primary cause of the market's current state. The EU has pushed over the years to increase the use of hub-based, gas-on-gas pricing and phase out oil-indexed contracts that typically provide greater price stability.

"There are many and complex drivers of high energy prices in Europe. That said, it is definitely easier to focus on a single cause and a traditional villain," Laurent Ruseckas, a gas expert at IHS Markit, commented on social media on September 17.

"If having some spare productive capacity is a violation of competition rules, then Gazprom has been breaking these rules for at least 10 years, without comment or complaint," he said. "Had Gazprom been producing all its fields flat-out at all times, it would have a vastly higher share of the European gas market (likely prompting a different letter or warning from MEPs)."

Gazprom said mid-month that exports to countries beyond the former Soviet Union were 138.6bn m³ in the first eight and a half months of the year, close to the record 2018 figure of 141.3bn m³.