Czech Republic a bit player in EU Commission case against Gazprom but still exposed

23-04-2015

The European Commission’s long delayed decision to launch proceedings against Russian state gas exporter Gazprom for alleged abuse of its dominant position on various markets in the EU garnered quite a lot of attention on Wednesday.

Photo: European CommissionPhoto: European Commission The Czech Republic figures among the eight Central and East European countries where the Gazprom abuse was perceived to be present, though not in its most blatant form. It relies on Russia for around 75 percent of gas needs with alternative sourcing from Norway and other suppliers compared with near total dependence for some countries.

Basically, the Commission concerns are that Gazprom forces customers in some countries to pay inflated prices because they have no real alternative supplier. In addition, it creates the conditions for such charging by compartmentalizing different markets by stopping customers reselling gas and it is also suspected of putting pressure on Poland and Bulgaria to make sure that decisions about use of existing pipelines (Yamal in Poland) and future developments (Southstream in Bulgaria) are in line with its interests.

The Czech Republic joins Hungary and Slovak where Gazprom is suspected of abusing its position mainly by preventing cross border flows of gas but not through the same blatant excessive prices and infrastructure interference carried out in Poland, the Baltic States, and Bulgaria.

Gazprom clearly though has in the past charged the Czech Republic’s biggest gas supplier, the then RWE Transgas. It eventually won a court case in Vienna in 2013 challenging its long term take or pay contracts with Gazprom which at some times forced it to pay around 50 percent higher prices for gas than the terms obtained from rivals. The damage was major and the compensation sought as well. For example, in 2011 RWE Transgas set aside 18.5 billion crowns to cover the ongoing costs of its disadvantageous gas purchase contracts with Gazprom which the Russian state company was reluctant to change. The Slovak government has also since won changes to its long term gas supply deal with Gazprom.

While, the EU can step in and challenge Gazprom’s actions within the 28-strong politico-economic bloc, its power to determine what the Russian giant does elsewhere is minimal. And it was perhaps apt that the Czech government’s special emissary for energy security, Václav Bartuška, pointed out in the business paper Hospodářské Noviny on Thursday that Gazprom’s real power is to decide down which pipelines its gas will be pumped. It has already indicated that it doesn’t want to ship its gas through Ukraine after 2020. Such a move stands to hit Czech energy company EPH, which has a 49 percent stake in Slovak gas pipeline company Eustream, as well as its Czech counterpart, NET4GAS, now owned by the investment consortium of Allianz Capital Partners and Borealis Infrastructure.

While Eustream might brandish guarantees that Gazprom will continue to use the Slovak route until 2028, these could easily turn into worthless pieces of paper, Bartuška warned. Neither Prague nor Bratislava has any real influence in Moscow to deflect such a decision if Gazprom and the Russian state was determined on it, he added.

23-04-2015