Sissi Bellomo - Il Sole 24 Ore, 22/04/2015
One of the charges the European Commission brought against Gazprom in its antitrust case is that it allegedly practiced an “unfair pricing policy” towards some customers that were thus forced to pay more than due for gas supplies.
What is a “fair” gas price anyway? The EU Competition Commission itself struggles somewhat to explain it. The issue, it says, is “partly” related to the price formulae used in Russian long-term supply contracts. By indexing gas to a basket of oil products, these formulae "unduly favoured Gazprom over its customers” in five Eastern European countries: Bulgaria, Estonia, Latvia, Lithuania and Poland. But these are not the only EU countries where Russian gas is still – at least partly – indexed to oil. Similar pricing systems are used (with no scandal, until now) by other relevant suppliers as well, among which one finds Algeria and, until a few years ago, Norway.
Probably it is an obsolete system. But is it also “unfair”, or even evidence of an abuse of dominant market position?
The European Commission makes it clear that it “does not consider that indexing a product’s price to oil prices or any other product is in itself illegal”. It also “does not take issue with the fact that gas prices are different in different countries”. Its conclusion that Gazprom prices might be unfair (with respect to some clients) hinges on comparisons “to a number of different benchmarks, such as Gazprom’s costs, prices in different geographic markets or market prices”.
Admittedly, for many years free market prices – or spot prices – have been lower, sometimes a lot lower, than contractual prices for gas, whether sold by Gazprom or by other suppliers. At one point, though, oil prices collapsed, losing more than half of its value in just a few months. With a time lag, (contractual) gas prices also started to fall as a consequence, to the point they became competitive – if not cheaper – with spot market gas prices.
While it is easy to blame Gazprom for hindering cross-border gas sales or for blackmailing some customers in order to obtain preferential treatment – for instance by making gas supply conditional upon investment in a pipeline – allegations about pricing policies could be vulnerable to counterclaims.