Energy Nord Stream 2 12 April, 2018 7:00 am   

Jakóbik: Gazprom won? Commission falls back

German Chancellor is pressing on minimum transit of Russian gas via Ukraine, aiming to conclude at the Nord Stream 2 deal that was forged by Russia supporters in her government. Gazprom conveniently applauds. Meanwhile, the documents obtained by show that the Commission is yielding to Russian giant in its antitrust proceeding – by Wojciech Jakóbik, chief editor of

Merkel is not backing on Ukraine in Nord Stream 2 debate

Some were gasped by Angela Merkel promise announced to the media, that the disputed project Nord Stream 2 will not be built, unless there is an agreement on the future of gas transit via Ukraine. She demands minimum transit volumes to be established. Gazprom replied, that 10-15 bcm could be sustained. This is no breakthrough. First to offer such a solution was Deputy Chancellor Sigmar Gabriel, well known from his declarations on the necessity to prevent the European Commission from interfering in Nord Stream 2, as was revealed in Kremlin transcripts.

We have informed about this in June 2016. Already back then Gazprom promised to keep the minimum level of supplies via Ukraine. So Mr. Aleksey Miller does not entirely depart from the truth saying when stating that Gazprom never really wanted to fully abandon transit through Ukraine. Gazprom had already agreed with his German partners to maintain the transit at least two years ago. Germany and Russia are simply pushing along with their agenda. Their declarations are no concessions – even if they look like ones. This is a part of a plan that is aimed to fool part of the public.

Leak: EC knows Gazprom abuses. There will be no consequences?

Commission backs down in antimonopoly proceeding

Disappointments do not end here. Little is left of the 2015 warlike announcements of Commissioner Vestager, when she presented Gazprom with of a 270 pages long list of competition law breaches in eight Central European EU Member States. The documents which have just leaked from Brussels show that the Commission chose to go soft on Gazprom and accept its proposal for settling the antirust proceeding in a way that is comfortable for the Russian Supplier. saw the documents.

Despite numerous appeals provided to DG COMP by Central European MSs and gas companies during the 2017 market test, the Commission will neither impose fines on Gazprom, nor bring an end to its abusive gas pricing policy. Instead, the Commission decided to shift the responsibility for decreasing gas prices in Central Europe onto international arbitration courts. This solution is scheduled to enter into force a month after Gazprom informed Ukrainian Naftohaz that it will not recognize the Stockholm arbitration awards granted to Naftohaz.

Decisive moment for Nord Stream 2

All of this comes just weeks before the Swedish, Finnish and Danish authorities are to decide on the final permits for the construction of Nord Stream 2 (the Germans have already given their consent). According to by the end of April all permits necessary to start the construction should be granted.

May 2018 was supposed to bring the climax of a decades long fight of Central European MSs for gas independence from Russia, and it is more obvious than ever that they cannot count on the Commission’s backing. DG COMP antitrust proceeding against Gazprom had its up and downs since it had begun around 2010. It’s by far the longest proceeding in EU history – constantly shadowed by EU – Russia political agenda. When the EU was still recovering from the 2009 gas crisis, initiated by Gazprom against Ukraine, the DG COMP launched a raid on several Central European gas companies in search of proofs of Gazprom abusive behavior and antitrust breaches in Poland, Estonia, Bulgaria, Czech Republic, Hungary, Lithuania, Latvia and Slovakia. It seemed that famous DG COMP will once again conduct a swift battle against yet another energy giant, who partitioned the EU gas market and monopolized supplies to several EU MSs. At least that’s what some MSs had hoped for.

However, the enthusiasm of gas market faded away as quickly as it began. The proceeding stalled for months, while the EU engaged in a new “reset” with Russia at the end of President’s Barroso term. A variety of issues was resolved at that time on a compromise basis with Russia, including the operations of Nord Stream 1, OPAL, Russia’s engagement in the Energy Charter Treaty, consent to construct the Southern Gas Corridor or the Ukraine and Moldova’s accession to the Energy Community.

The detente ended when “little green men” took over the control of Crimea in early 2014. The international protests, condemnations of Russia, and words of warm support for the Ukrainians swept through the globe, while the EU diplomacy took the matter into its own hands and imposed sanctions on Russia. Surfing the wave of general criticism of Russia, Commissioner Vestager aimed her guns at Gazprom and presented a 270 pages long Statement of Objections – a list of proofs of Russian monopolist’s abusive practices. The document, though blanked in some places, has just leaked in Brussels earlier this week and has obtained it. It draws a grim picture of the past decade of the Central and Eastern European gas markets.

Commission knows about the abuses towards Bulgaria…

Firstly, the document reveals that Gazprom used all its power to secure its gas monopoly in Central European EU Member States. Secondly, a cautious observer can note that Gazprom doesn’t pick its targets randomly, or even based on economical assessment. Gazprom consciously acts against these countries and companies, where the Russian Federation foreign policy expects it to. The document shows that Bulgaria, has been treated by Gazprom almost as a colony. The Bulgarians were blackmailed, stolen money from, and prevented any chance of getting out of the toxic Bulgargas – Gazprom relation.

And the impact was felt throughout the Balkans. No country interconnected with Bulgaria could receive gas without Gazprom’s consent. It is also important to note, that the pallet of Gazprom instruments of keeping Bulgarians by their throat, is not that sophisticated. A few check points on their metering stations, lack of consent for a reverse flow here and there and a “technical” IGA which establishes basic rules of South Stream construction – this was enough. Despite the EU epic struggle for the implementation of III energy package, Gazprom was able to take over the control of a gas sector in the whole EU Member State. In consequence Russia obtained huge political leverage over the State itself.


Poland is widely criticized in Russian media for its alleged “anti – Russian policy”. In fact, Poland has become a battleground between Gazprom an the Polish gas giant – PGNiG and is trying to reduce its dependence on the Russian supplies. Russian gas delivered to Poland on the basis of the Yamal contract is the most expensive in the whole EU. For no obvious reason… If you look at the map you see that gas is supplied to Western Europe from Russia, through Belarus, Poland into Germany, where it becomes an “EU gas”. When gas comes to Belarus it costs approx. 180 USD/1000 m3. But when it crosses the border to Poland – up 350 USD/1000 m3. One could say – well Poland is further down the stream so it has to pay more for transport. However, after crossing the border between Poland and Germany the price drops to little more than 200 USD/1000 m3. Only one conclusion can be drawn from the analysis of the DG COMP documents: Poland has to pay a ransom to Gazprom, for sacking Gazprom of control over Polish gas infrastructure, and preventing it from directly entering the Polish market. This has been well documented in the Commission statement of objections, which broadly discusses the implications of 2009 gas crisis for Poland and 2010 gas negotiation between Poland and Russia.

As a result of these events Poland bought precious time needed for the construction of diversification projects. The construction of LNG Terminal was a milestone for Poland. However, its first choice for diversification was the physical reverse flow on the Yamal pipeline (Polish – German border). But here came Gazprom, who is not only the owner of the Belarussian gas grid. It is also the owner of gas grid on the other side of Poland – on its border with Germany. As DG COMP clearly proved in the Statement of Objection, Gazprom was blocking the construction of the reverse flow for years, in spite of the obligations resulting from EU Security of Gas Regulation. Poland has finally succeeded in the construction of this infrastructure. However, in 2014/15 Poland once again was surprised to learn that the reverse flow might not work at all, due to the operational regime of a single gas storage unit located in Germany, just few dozens of kilometers from the Polish border. The injection of Katharina storage has priority over supplies to the Polish market through the Yamal pipeline reverse flow. Thus, in case of a crisis gas will not go to Poland but to the storage itself. wrote about this first in Poland. The storage is no surprisingly controlled via a subsidiary company by…  Gazprom.

The resemblance of Gazprom activities against Poland with the activities undertaken for years against Bulgaria is stunning. A piece of infrastructure here and there which is under the control of Gazprom can efficiently prevent diversification to these countries. In case of a gas crisis it allows Gazprom to fully control all supply routes to the Polish or Bulgarian gas markets. What is the Commission response to this? None. The Commission gives ground to Gazprom, arguing that Poland and Russia have concluded a binding Intergovernmental Agreement, and the Commission has no jurisdiction over these arrangement. “It seems we have crossed yet another level of ridiculousness. According to the EU Commission the bilateral IGA between an EU Member State and a third country stands higher in the legal system than the EU Treaty” – states a Brussels official involved in the antitrust proceeding who spoke to.

Baltic states

Further north the situation is no different. The Baltic States and Finland are effectively cut off from any supplies of non – Russian gas. The floating LNG Terminal independence provides little comfort. Importing gas by sea takes time, and a cut-off from Russian supplies may occur at any time, at least until GIPL pipeline is constructed.

Even though Gazprom fully controls this regional gas market, it is not able to restrict itself from abusing the dominant position even here. As the Commission indicated in the Statement of Objections unfair pricing of gas in the Baltic States was and still is a common Gazprom practice towards these countries. It is however important to note, that the price is not the same for all. The countries which pursue a less anti-Russian policy pay less, the ones that don’t – pay more. The Commission intends to do little to protect the Baltic States. To close the antitrust proceeding the Commission and Gazprom together intend to grant them… the right to arbitration, a right that is part of nearly every gas supply contract in the world.

In addition, these countries will have a “real” opportunity of diversification. The Commission and Gazprom will allow for swaps to be done between internal EU gas market and the Baltic States gas market. Sounds complicated? It isn’t. Thanks to the Commission, some countries of the Central Europe will be able to sell their gas virtually to the Baltic States instead of collecting it from Gazprom on their borders. Again, Gazprom will not lose anything. It will sell the gas one way or another to one country or another. And by the way – the swaps are conditional upon Gazprom approval. Moreover, making the release of delivery points conditional upon Gazprom’s approval can lead to shifting the gas supply route to Poland, from Yamal to Nord Stream 2.

What will the Commission do?

The documents disclosed in Brussels this week suggest that Gazprom won the antimonopoly proceeding. It is worth to remember that no final decisions have been made yet. The Commission still has time to reflect. The disclosed documents are the best proof that one can’t go soft on Gazprom. In case of Google or Microsoft it was not a problem. Why is it a problem now?