European Commission and Germany raid Gazprom

 

European Commission and Germany raid Gazprom

The European Commission and the German Federal Cartel office have confirmed that they have launched unannounced inspection visits on “several companies” operating in the energy sector, including Gazprom.

The antitrust probes relate to suspected abuse of dominance concerns. It is not unusual to see coordinated dawn raids across multiple EU sites in cartel cases but there is no reason why that modus operandi should not occur in an abuse case.

Media reports indicate that the Commission raided the German offices of Gazprom and its subsidiary Wingas founded on concerns around gas price increases and capacity withholding.

The Commission has rejected claims that the investigations are politically motivated.  However it is clear that European antitrust authorities have heightened their vigilance around the ramifications of the war in Ukraine for EU gas prices..

The Commission had an ongoing investigation into Gazprom even before the invasion of Ukraine citing unusual business behaviour.  Concerns have been raised which are reminiscent of the ‘strategic manipulation’ that was alleged in earlier Article 9 commitments cases in the energy sector.   The Commission has hinted at possible capacity withholding where Gazprom is alleged to fill only 16% of its storage facilities compared to 44% for other operators.

Meanwhile, last year Ukraine’s Naftogaz made a complaint to the Commission that Gazprom “sharply reduced” its gas deliveries to exert pressure on Russia’s neighbour.  In response, the Russian deputy prime minister Novak has laid the fault for the price increases at EU policies including Germany’s actions over the Nord Stream 2 gas pipeline.  He has also cautioned that sanctions could further put global energy markets in jeopardy.

Plainly today’s raids represent a ramping up of the Commission’s antitrust scrutiny of EU energy markets.  It would be naïve to suggest that the timing of this is unrelated to recent events in Ukraine and that Gazprom is only incidental to the intensification of regulatory focus. 

What is less clear is whether the actions of the antitrust authorities can make a real difference in geopolitical terms.  It is a familiar complaint that antitrust authorities act too late for their interventions to matter.  There can often be a double-bind problem: intervene too early and you may create economic shocks that make the problem worse; wait until you have more information to take a fully informed decision and it can be too late.  That dilemma becomes less of a quandary as events in Ukraine unfold.  

I would like to hope that the European regulators are able to act with agility when the time comes.  If supplies are in fact withheld, in significant amounts, it may be asked whether the time has come to introduce interim measures?  However, that still faces a practical question of how such measures would be enforced if an order came from the Kremlin to ignore them.  The test may well come down to the ‘realpolitik’ or, putting it differently, whether the EU as a destination for Russian gas is too valuable to lose.