понеделник, 4 май 2015 г.

The Manager Magazine: EC ruling in the anti-trust case against Gazprom - a prelude to a new world in gas trade

The Statement of objections of the EC in the anti-trust case against Gazprom has cleared the way for the final chords the gas battle between Gazprom and the EU. The opening of the Commission is subject to further appeal and due process but it clearly constitutes a defining moment and an explicit sign of the changed balance between Gazprom - the seller and the buyers. The EU is still overly dependent of Russian gas and there is no sign of early abatement but it is evident that the resource roots of the Russian budget has exposed the Kremlin to a far greater vulnerability of Kremlin in power exchanges with the West.
What does the Statement of Objections spell for the future of energy relations between Russia and the EU?

The statement and the final ruling will impact the contractual base of gas relations with Gazprom both in trade and transit. All the critical and contentious aspects regarding price structure, price levels, sensitive clauses like take/ship or pay, re-export restrictions and discount-for-favour linkages - will undoubtedly be revised or reconsidered in all contracts. But even before formal amendments are made these clauses will cease to be complied with as indicated in the reverse gas trade. 
It is a matter of time before Central and East European importers start to benefit from the EC hard ball diplomacy. What the Western European gas companies had achieved over time in rapports with Gazprom through a mix of market, legal and political moves - arbitration court and out of court resolutions, shifts to spot market trading and sufficient liquidity of non-Russian gas supplies - will inevitably spill over in Central and Eastern Europe.
What will reverberate in the CEE countries most in the immediate future will be the search for an optimal reaction - whether to opt for bilateral agreements, including arbitration court procedures in order to lower prices and recover losses for past overpriced Russian gas and/or underpaid transit fees or to keep a low profile and let the EC take the lead in the process and settle all outstanding issues in direct talks between the Commission and the Russian government. 

The only difference being where the proceeds in the process will ultimately end up - with the Commission or with the individual claimant companies. At any rate all those bilateral agreements will weight in the final reconciliation stage but it is unlikely that the Commission will allow individual countries to strike final deals with Moscow and erode the coordinated and consolidated EU approach. After all that is the essence of the EU Energy Union.

The first "casualty" will be the $100 per tcm political premium in the final price that is decided by the Russian government in accordance with its estimate of the political worthiness of the buyer. Hungarian PM Orban ranks high in Kremlin's political scoreboard - hence he was awarded a $260 per tcm price tag - while Poland paid a significant mark above. In the SEE Russian friendly Greece was blessed with a price reduction that allowed Greek consumers to pay for gas price between - 3-9 % cheaper than Bulgarians in spite of greater distances and higher transit fees.

With the thinly veiled threat to launch a new investigation for compliance with EU anti-trust legislation and regulatory practices for Turkish Stream transit countries the EC has made it clear who is holding the upper hand if push comes to shove.

CEE importers could hope to gain both in the event of retroactive claims for overpriced gas and lower than market transit fees. Bulgaria could potentially make the case for at least $250 million in over payments for gas and equally significant amount should Bulgartransgas decide to retroactively benchmark received payments for transit of Russian gas against market averages in the CEE.

Ukraine has wasted no time and has already increased damages claims in the arbitration case against Gazprom to $16 billion..  

The most sensitive part of the Statement of Objections are the "low prices for political favors" swaps that have served a fertile ground for fresh investigations against South Stream countries.
All this is the tip of an iceberg of consequences with the center of the conflict gradually shifting to Ukraine as Europe has clearly stated its decision to continue relying on the transit system of Ukraine and its storage facilities as the most cost effective route for importing Russian gas. It is just a matter of time and detail to watch most of Russian gas being traded at the Russian-Ukrainian border if Gazprom persists in its attempts to build alternative delivery routes.

Further shock waves could follow with the forced exit of Gazprom from downstream asset ownership in affiliated companies in the EC.

Many observers believe that following the award of $ 50 billion in the arbitration against the Russian state in the Yukos case and the almost routine losses in arbitration cases of Gazprom for abuse of market position the threat of new tens of billions of potential new arbitration payments could cripple Kremlin's decision making process.

Gazprom and other gas producers are already facing new realities in the global market with almost 200 bcm of new LNG gas coming on line in the next three years, growth in gas demand lagging and spot trading sidelining long term oil indexed contracts.  

Gazprom can still pull many levers in the soft spots of the EU Energy Union countries. Besides political flirts with Putin sympathizers among CEE leaders in the discount for influence game, Miller has renewed threats to lower deliveries in response to gas reversing practices. The Russian gas monopoly has also stated intention to penalize all importers of Russian gas that insist on using the Ukrainian transit system. An indication of Moscow's resolve to shift transit away from Ukraine and to refuse subordination to EU regulatory and legal practices is its intent to stay out of the EU zone and deliver gas at EU border. 

Gazpromexport has notably refused to take part in a new tender for allocation of transit capacity under the Third Energy Package for one of the pipes in the section Isaccea-Negru Voda of the TransBalkan Pipeline of which it has been the sole beneficiary.

The game is not over. Yet.

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