Putin Impedes European Inquiry of State Fuel Supplier

http://www.nytimes.com/2012/09/12/world/europe/russia-impedes-inquiry-of-fuel-supplier-gazprom.html

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MOSCOW — President Vladimir V. Putin of Russia issued a decree on Tuesday that had the effect of prohibiting Gazprom, the state natural gas giant, from cooperating with European Union investigators trying to build an antitrust case against it.

The decree prevents strategically important companies that do business overseas — a category that includes Gazprom — from providing information to foreign regulators without approval from the Kremlin. The decree says it applies to regulators from “unions of foreign states.”

The decree did not refer to Gazprom by name or the announcement last week that the European Union had opened a formal investigation into the company’s pricing and sales policies.

But it raises the stakes in what could become one of Europe’s highest-profile antitrust cases in years, on a level with the actions that forced American technology companies like Microsoft to change their ways.

Gazprom is in many ways more than just an important company to Russia. It is the country’s largest taxpayer and its largest business concern, whose earnings, though down during the recession, constitute about 10 percent of Russia’s yearly economic activity.

Its natural gas pipeline network extends from fields in the Arctic off Siberia deep into Europe, providing fuel to heat homes and power factories as far away as Italy and France.

These pipe tentacles are also pivotally important to the Russian government’s foreign policy in other former Soviet republics and Eastern Europe, where selective pricing of natural gas is used to tilt politics in Russia’s favor.

The biggest threat to Russia is that if Gazprom is found to have violated Europe’s antimonopoly laws, it will have to open its pipelines to competitors and alter its oil-linked pricing formula in European Union countries. Sergei Kupriyanov, a spokesman for Gazprom, said on Tuesday that the European Union was using regulations to interfere with the energy market.

It “can be viewed as pressure from the European Union on Gazprom, with the goal of influencing prices and the results of commercial contracts, which clearly contradict the principles of a market,” Mr. Kupriyanov said at a news conference in Moscow.

Mr. Putin’s decree was Russia’s first response to the European Union’s announcement that it had formally opened an antitrust case, showing that positions were hardening on both sides.

In 2006 and 2009, Russia shut off fuel to Ukraine during disputes over pricing. In theory, Russia holds the power to cut off the heat in European homes and idle factories this winter if a deal is not reached, though Russia would suffer greatly from lost revenue. Russia provides about a quarter of the European Union’s natural gas.

Gazprom is a legal monopoly inside Russia, a fact not disputed by the company. By law, it is the only entity authorized to export gas. It has argued that the utilities in Europe that are its major customers can choose from suppliers in Norway or North Africa, or can use liquefied natural gas transported by ship.

Mr. Putin is known to prefer to take part in energy talks personally. In the disputes with Ukraine, he haggled directly and traded lower gas prices for access to a naval base.

The decree on Tuesday makes Mr. Putin’s involvement inevitable. It prohibits strategic companies from selling foreign assets or renegotiating contracts without Kremlin approval. No approval will be granted if the changes “damage the economic interests of the Russian Federation.”

That will end Gazprom’s policy of quietly offering discounts to favored customers in Europe. With many economies on the Continent fragile, any moratorium on negotiating price discounts from Russia will be unwelcome.

Just this past weekend, Mr. Putin had seemed to take a more conciliatory stance. He suggested during a summit meeting of the Asia-Pacific Economic Cooperation forum that Europe’s dispute with Gazprom should not be allowed to devolve into a trade war. A solution will be found, he said.

But at the news conference on Tuesday, Mr. Kupriyanov, the Gazprom spokesman, took a harder line. The European Union’s investigation is encouraging Gazprom to look to Asia for new markets, he said, and the company’s board could decide to speed up a decision to develop gas fields in eastern Siberia.