Global Energy Center Nonresident Senior Fellow Alan Riley writes for Natural Gas Europe on why Gazprom has strong incentives to deal with the European Commission’s competition investigation:

Last week the Deputy Chairman of Gazprom Alexander Medvedev met with the European Union (EU) Competition Commissioner Margrethe Vestager for the first time to discuss the antitrust case launched against the company. Following this meeting Mr Medvedev made it clear that he hoped that the case could be ‘amicably settled’. There are indeed compelling reasons for Gazprom to do a deal. First market developments are rendering Gazprom’s existing business model irrelevant and it is that business model which is being substantially challenged in the antitrust case. Secondly, the consequences of an actual published EU competition decision against the company would be devastating in terms of reputation and scale of liability. Both these factors provide compelling incentives for Gazprom to file draft Commitments to the Commission to provide a basis for a deal.

At first sight it looks like doing any such a deal would be very difficult to do. The Commission’s Directorate-General for Competition launched raids on Gazprom offices across the EU, and those of its corporate allies in September 2011. In September 2012 it formally opened an investigation into Gazprom focussing on attempts to foreclose markets, denial of access to competitors to competing pipelines and excessive pricing. Negotiations were commenced with the Commission from December 2013 to June 2014. These negotiations did not result in an offer of commitments from Gazprom to settle the case. After Commissioner Vestager took over in November 2014 she reviewed the case and filed antitrust charges against Gazprom in a document known as the ‘statement of objections’ in April 2015. Gazprom now has until mid-September to file a defensive reply to the statement of objections.

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