Fool Me Once: Gazprom’s Reprieve

While natural gas behemoth Gazprom may have enjoyed explosive success in a pre-2012 world, the political undertones and monopolistic behavior eventually yielded an antitrust probe into the company's affairs by the European Commission in April of 2015. After the proposal of the new draft compromise in Brussels that strives to terminate this very probe in exchange for more competitive behavior from Gazprom and stricter adherence to the legalities of the gas market, a fundamental question remains: will the evasion of fiscal penalties really incentivize Gazprom to refrain from abusing its market power. Or, will it simply make it easier for the gas giant to engage in practices condemned by a host of Eastern European countries including Poland?

Although the answer isn't clear, what is clear is the fact that Margrethe Vestager, the European Union's competition commissioner, thinks that the deal will "enable the free flow of gas in Central and Eastern Europe at competitive prices." Yet Gazprom has a history of capitalizing upon its position as the holder of the world's largest natural gas reserves, such as in 2014 when it strategically placed Ukraine upon a prepayment scheme due to debt, creating friction between the two that warranted intervention by the European Union.

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Considering that Gazprom is an extremely politicized corporation with multiple links to Moscow and an alleged environment of nepotism, it is debatable to what extent this "debt" would have actually impacted company finances even without a prepayment plan. Thus, suspicions are being raised about how free the flow of gas will be as an outcome of this deal especially when intervention by a third party organization has been required before in order to ensure ceaseless gas passage.

Moreover, because of Gazprom's heavy involvement in the global gas market, its use by Moscow as a tool of diplomacy and leverage has landed the company in deep waters not only economically but also politically. Russian cabinet ministers have regularly been involved in discussions regarding the allegations against Gazprom, their heavy participation a result of the fact that the company has formed a significant portion of Russia's tax revenue, essentially equating Gazprom to a parliamentary reservoir with key political figures on the payroll.

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While Gazprom has offered nation-specific solutions to each of the problems addressed by the new deal, including limitations on cross-border sales and consideration of investment in infrastructure, nations like Poland will still not condone it; this is a risk that should not be taken considering that European relations with Poland are anyway tense due to the Opal Pipeline and recent Council elections.

Vestager stated, "You have to keep the law enforcement clear of politics." However, this works both ways: if Gazprom had kept the politics out of the very laws it was supposed to follow, the antitrust probe would never had been launched in the first place. That being said, if the deal is accepted, Gazprom is subject to a fine of 10 percent of its worldwide revenue by Brussels for breaching any of its terms.