Gazprom Faces Possible 50mn Fine by Polish UOKiK

The Office of Competition and Consumer Protection (UOKiK) has initiated an investigation against Russia’s top gas producer Gazprom, which is threatened with a fine amounting to 50 mln euro for refusal to cooperate in the course of proceedings concerning the construction of the Nord Stream 2 gas pipeline, the regulator said in a statement on Wednesday, TASS said.

“President of the Office of Competition and Consumer Protection initiated proceedings against Gazprom for lack of cooperation during an anti-trust investigation,” the statement said. “For failure to provide information, Gazprom is liable to a fine of 50 million euro,” the regulator noted.

In 2018, UOKiK brought charges of financing construction of the gas pipeline without a legally required permit against Gazprom and its five Nord Stream 2 partners – OMV, Wintershall, Shell, Uniper and Engie. The regulator suggests that Gazprom without preliminary approval entered into a financial transaction with those companies, which could lead to the restriction of competition.

At the beginning of 2020, President of the Polish regulator requested Gazprom to provide documents relevant to the case, particularly gaseous fuel transmission, distribution, sale, supply, and storage agreements concluded with firms financing the Nord Stream 2 construction.

“Law is clear and applies equally to all of us, however, Gazprom refused to provide documents relevant to our investigation on several occasions. Gazprom cannot operate above the law and, for that reason, I have initiated proceedings against the company to impose a fine for failure to provide information during the pending investigation,” President of the Office of Competition and Consumer Protection Tomasz Chrostny was quoted as saying. “If the lack of cooperation was intended to slow down the Office in its investigation, I can say that the companies did not achieve their goal. We already have adequate evidence and are nearing the end of our investigation,” Chrostny added.

In 2015, the Office received an application filed by six companies for approval to create a joint venture responsible for the construction and operation of Nord Stream 2. In 2016, the Office voiced its concerns regarding the concentration, in which it noted that the planned transaction could lead to the restriction of competition and presented its reservations.

“The companies withdrew their application, which in practice meant that they were prohibited to perform a merger. Meanwhile, not long after information that the would-be parties to the transaction have signed an investment financing agreement started to appear in the media. Therefore, proceedings against Gazprom and its five trading partners regarding the execution for a transaction without obtaining approval from the Office of Competition and Consumer Protection were initiated,” the Polish regulator said.

For violating the prohibition against concentration without obtaining approval from the Office of Competition and Consumer Protection, “the companies are liable to a fine equal of up to 10% of their annual turnover,” the regulator emphasized. “In addition, if the concentration was implemented and it is no longer possible to restore competition on the market, the President of the Office may order the total or partial disposal of the company’s assets and shares granting control over the company, and even the dissolution of the company over which the companies concerned hold control,” the statement said.

The Nord Stream 2 pipeline is set to run from the Russian coast along the Baltic Sea bed to the German shore through the exclusive economic zones and territorial waters of five countries – Russia, Finland, Sweden, Denmark, and Germany, thus bypassing transit countries of Ukraine, Belarus, Poland, and other Eastern European and Baltic states. Each of the pipeline’s two stretches will have a capacity of 27.5 bln cubic meters. Gazprom’s European partners in the project are Germany’s Wintershall and Uniper, Austria’s OMV, France’s Engie, and the British-Dutch Shell.

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