Kremlin enters EU-Gazprom row with strategic firm rules

  • World
  • Tuesday, 11 Sep 2012

MOSCOW (Reuters) - President Vladimir Putin tightened Kremlin oversight of "strategic" Russian companies operating abroad and called for a swift conclusion to European Union investigation into gas export monopoly Gazprom's business in Europe.

Putin signed a decree on Tuesday requiring companies deemed strategic - which are mostly major natural resource holders - to obtain government approval to disclose information to foreign regulators, alter contracts or sell property abroad.

In remarks on the conflict between the EU and the company that supplies around a quarter of all natural gas consumed in Europe, Putin mixed soothing talk of the need for smooth ties with a warning that Russia can find buyers elsewhere.

"We would like all questions that remain unclear for our partners in the European Commission to be cleared up as quickly as possible, so that we can work together smoothly," Putin said. "I hope that is how it will be."

The European Commission said last week its investigation would focus on suspicions Gazprom was hindering the free flow of gas across the EU's 27 countries, preventing supply diversification and imposing unfair prices on its customers by linking the price of gas to oil prices.

While the decree will help the state support Gazprom in the EU investigation, it will also enable it to tighten its grip on the company -- a key taxpayer -- as well as on other state-run companies.

"On the one hand, the government is now trying to show that Gazprom is only subject to Russian laws, but on the other the Kremlin has long nurtured plans to increase its sway over Gazprom," said an analyst at a major Russian bank who asked not to be named as the bank does not comment officially on political issues.

The Kremlin decree added to strain on Russia's relationship with Brussels, where a top official said Putin is all but locking down tight political control, which extends from the commanding heights of the economy to opposition street movements.

"This trend raises serious questions as to the state of the rule of law in the country, in particular the use of legal and law enforcement structures and other instruments for political purposes rather than for protecting and safeguarding the rights and freedoms of the citizens of Russia," EU foreign policy chief Catherine Ashton said in a speech to the European Parliament on Tuesday.

Putin on Sunday ruled out a trade war over the European Commission's antitrust investigation, but hinted that demand for Russian gas in Asia could reduce its dependence on EU markets.

Before the Kremlin announcement, the vice president of the European Commission, Joaquin Almunia, speaking in Strasbourg, France, rejected Gazprom's earlier suggestion that the EU investigation touched Russian state interests.

"We don't look at the nationality, or who the shareholders are, or whether it's a public or private company, what we are concerned with is the impact that business activities will have on our market" Almunia, the EU's top antitrust official.

"So we have opened this investigation as we have opened many investigations in the energy markets or in other sectors."

The EU's move marks the formal launch of an investigation that began with raids of Gazprom subsidiaries in Europe a year ago. Since then, Gazprom has made major price concessions in its oil-linked contracts to most of its key European customers.

Almunia said the commission informed Gazprom of its actions and was preparing to send out questionnaires to Gazprom's European units, its counterparties and other market players to investigate possible abuse of a dominant market position.

A Brussels antitrust lawyer who spoke on condition of anonymity said it would complicate the investigation but not prevent it.

"The Commission could come to a decision independently of any information provided by Gazprom. It could still construct a case from evidence from third parties," he said.

He said even if EU regulators cannot force Gazprom to amend its contracts, they can still force it to pay hefty fines.

Antoine Colombani, spokesman for Almunia, declined to comment immediately on Putin's decree.

Gazprom called an urgent press-briefing after the decree was signed, where gas monopoly spokesman Sergei Kupriyanov said that the EU investigation was meant to pressure the giant to review its prices to European consumers.

"The actions of the European Commission, the start of a formal investigation of Gazprom, like last year's searches of Gazprom affiliates, can be viewed as pressure by the European Commission on Gazprom with the aim of influencing prices and the results of commercial negotiations," he said.

Earlier, Putin linked the recent investigation to the European debt crisis, blaming some of the European Commission officials of a desire to shift internal problems to Russia.

(Reporting by Denis Dyomkin in Sochi and Justyna Pawlak in Brussels Writing by Melissa Akin, Alexei Anishchuk, and Steve Gutterman; Editing by Steve Gutterman, Hugh Lawson and Tim Dobbyn)

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