EU charges Russia's Gazprom with abuse of market position

EU regulators on Wednesday formally charged Russian gas giant Gazprom with abusing its dominant market position in Europe, a move that risks inflaming tensions with the Kremlin.

"All companies that operate in the European market -– no matter if they are European or not -– have to play by our EU rules," said Margrethe Vestager, the Competition Commissioner who last week opened a similar high-profile case against US Internet giant Google.

The European Commission, the EU's powerful executive arm, said investigators had found that Gazprom significantly hindered competition in Central and Eastern European gas markets, where the company is by far the dominant supplier.

Specifically, the EU accuses Gazprom of infringing European single market rules by forbidding the resale of its gas between EU countries, allowing the Russian giant to charge unfair prices.

Vestager said these "artificial barriers were preventing gas from flowing from certain Central Eastern European countries to others, hindering cross-border competition."

If the claims are substantiated, Gazprom risks fines as high as 10 percent of the company's overall sales, which amounted to the ruble equivalent of 93 billion euros ($100 billion) in 2013, according to the latest data available.

The countries involved in the EU probe are Lithuania, Estonia, Bulgaria, Czech Republic, Hungary, Latvia, Slovakia and Poland -- all former Soviet-era satellites that have cast their future with the EU, not Moscow.

Gazprom's leading position and close ties to the Russian government has made the handling of the case especially sensitive for EU regulators.

The European Commission formally opened its probe in September 2012 and has significantly delayed moving forward due to the crisis with Moscow over Ukraine.

Russia alone supplies about a third of the EU's gas requirements. EU states bought 125 billion cubic metres from Gazprom last year, with half that amount going through pipelines across Ukraine.

Gazprom has 12 weeks to officially respond to the charges. On Wednesday it provided no immediate reaction to the accusations in Brussels.

However, a source close to the company told Russian business daily Kommersant that Gazprom would fight the charges in court, feeling it had a "strong case."