European Commission Investigates Gazprom Sales in Central and Eastern Europe
The European Commission has officially launched an antitrust probe against Gazprom, which is suspected of imposing unfair prices in Central and Eastern Europe.
Offices of Gazprom’s European customers were raided by EU officials last year, which led to the subsequent investigation of Gazprom. The Commission said it will treat the case as “a matter of priority” and that the result of the investigation is not predetermined.
The commission is investigating whether Gazprom has divided European gas markets by restricting the free flow of gas across member states, prevented diversification of supplies and priced gas unfairly. The commission said there is no deadline for completing the enquiry, but declined to give further details.
The Russian gas giant faced a probe last fall, when EU inspectors searched the offices of 20 of its customers to uncover possible abuses, either by the supplier or the customers. Although Gazprom was not mentioned at the time, the EU commissioners made it clear it was its contracts they were interested in.
Russian officials have acknowledged the risk of a probe against Gazprom. The then Deputy Energy Minister Sergei Kudryashov admitted in March that there was a certain discrepancy in Gazprom’s pricing polices, which is not immediately explainable by any market reasons. “This increases the risk of antitrust prosecution in Europe, as evidenced by the recent raids on its clients’ offices,” he said.
Both Gazprom and the Energy Ministry declined to comment on Tuesday.
Companies found to have violated EU competition rules can be fined up to 10% of their annual revenue. If the violation was committed over a period of several years a fine of 30% can be imposed. The highest fine ever paid by a gas company in Europe was that imposed on German company E.On and the French GdF in 2009 – 553 million euros each for collusion on the German and French markets, said Mikhail Korchemkin, head of East European Gas Analysis.
Although the European Commission representative did not name the specific years or countries where Gazprom could have violated the rules, Korchemkin estimates that the company may have to pay $1.1-1.4 billion for one year, or $4 billion for several years, based on its revenues from all Central and Eastern European supplies in 2010-2011.
European customers have repeatedly complained of unfair pricing where Gazprom is concerned; some are already in arbitration with the Russian supplier. Most of the complaints came from Lithuania, one of which actually led to the investigation, and Poland. The former PGNiG CEO Michal Szubski told Vedomosti last year that they had filed for arbitration after Gazprom repeatedly refused to lower its prices, without giving any rationale, except for hints that Poland did not really have the technical ability to diversify its supplies.
The investigation could take up to three years, Korchemkin said. The risks for Gazprom are high, although European commissioners will not necessarily impose a penalty. They may issue an order for them to amend their practices.
Plummeting Foreign Trade Threatens Belarus’s Prosperity
Belarus’s foreign trade balance has plunged by nearly 95%. The fall is, presumably, due to Russia’s efforts to stop the illegal export of Belarusian petrochemicals to Europe. Political analysts say that Moscow still has Belarus in its economic grip.
In the first six months of 2012, Belarusian officials sat back complacently as exports exceeded imports and capital inflow guaranteed financial stability. Even independent experts agreed that under these circumstances Belarus could prevent the devaluation of its national currency.
But concerns resurfaced after the national statistics service reported in July that export revenues had plummeted to $23 million from $430 million in June, while imports increased by $140 million. Although the overall foreign trade balance for January-July remains positive at $2 billion (for the same period last year, Belarus had a trade deficit of $3.4 million), economists are alarmed by the July trend. Leonid Zaiko said that “the attempt to cash in on the export of solvents and dilutants has provoked a harsh reaction from Russia, and now we see the disintegration of the positive export balance.” He pointed to systemic mistakes in the country’s economic policy, which are changing the balance of domestic trade. “Salaries, allowances and pensions are rising, alongside the demand for imports. But GDP has only increased by 3% while salaries have soared by 30% in dollar terms.”
Most experts say, however, that exports are falling because Belarus can no longer export solvents and lubricants to Europe without paying an export duty to Russia. Following a scandal last spring, Russia stopped supplying raw materials for the production of solvents and dilutants to Belarus.
The Belarusian government has several options. If it does nothing, there will be a foreign trade deficit this year, while increased salaries will put pressure on the foreign exchange markets, creating the conditions for currency devaluation. The other option is to enact pro-market reforms, which would increase foreign currency revenues from privatization and subsequently from the more efficient privatized enterprises. But experts doubt that the government would choose the second option. Energy market expert Tatyana Manyonok said: “Belarus would look for other variants as long as it can hope to get oil and petrochemicals tax-free.”
Ukraine is worried by the growing supply of Belarusian petrochemicals. This year, Belarus increased diesel supplies by 83%. Experts and journalists have established that the bulk of growth came from Triple, a company owned by Belarusian oligarch Yury Chizh, who is friendly with President Alexander Lukashenko. Experts also say that Belarus is exporting more bio-diesel made from low-sulfur diesel fuel supplied duty-free by Russia.
Political analysts warn that Russia knows about Belarus’s plans to cheat it but has so far dealt with the issue quietly because it has no time for it. On the other hand, Moscow is not going to let Lukashenko off the hook on energy. He will have to pay for Russian subsidies by privatizing Belarusian companies or, at worst, by giving up his personal power and the country’s independence.
Argumenty i Fakty
War Resumes in North Caucasus
A wave of terrorist attacks rocked the North Caucasus last week. The situation in the region is reminiscent of a civil war in which neither co-religionists nor fellow countrymen are spared. All the news from there is increasingly like the news from the front line.
In Chechnya, militants bombed and shot at a column of police officers. Several law enforcement officers were wounded. Later, four SWAT police officers from Bashkiria were killed elsewhere in the republic.
In Buinaksk, Dagestan, the head of a detention center was seriously injured by a car bomb. Soon afterward, two traffic police officers were killed and local residents came under automatic weapons fire – two were injured, one killed.
In the Kumtorkalinsk District of Dagestan, a 33-year-old police major was killed at his duty station.
In Khasavyurt, Dagestan, two gunmen opened fire on the worshipers at a mosque with a pistol and submachine gun. Eight worshippers were seriously injured. Before disappearing, the extremists mined the mosque’s prayer hall with a homemade bomb. In the same city, unidentified persons fired at police officers. Two officers were wounded.
In Ingushetia, unknown assailants shot the owner of a grocery store and one of his customers. In Malgobek, gunmen killed a police inspector. A suicide bomber detonated himself at the funeral. Eight people were killed, fifteen wounded.
In North Ossetia, unidentified persons fired at a police car. One officer was killed, the other wounded.
The terrorists were not even deterred by the holy month of Ramadan.
“Members of illegal armed groups do not recognize official Muslim leaders, do not believe the mosque to be a sacred place and do not want to comply with the requirements and traditions of classical Islam,” said Dmitry O., an intelligence officer serving in the Caucasus. “Their goal is to attract as much attention as possible to their atrocities. This is easier to do during the most important Islamic holidays.”
Dmitry O. said that terrorists are aiming to achieve the highest possible public outcry, which will not only attract new members to their ranks, but will also attract more investment from abroad.
“Getting an accurate count of the young people who have armed themselves and left for the mountains is problematic,” Dmitry O. admitted. “Tensions will not let up any time soon. Not long ago, the attacks where hit-and-run – gunmen settling scores with personal enemies in uniform. But now incidental civil servants and civilians are increasingly in their sights.”
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