Maximum penalty imposed against Russian gas giant
Gazprom 'fundamentally disagrees' with Polish ruling
Five European co-financiers also hit with smaller fines
Petrotahlil - Poland's anti-trust authority has imposed a fine of more than Zloty 29 billion ($7.61 billion, Eur6.47 billion) on Russia's Gazprom for building the Nord Stream 2 gas pipeline without its approval, in a move likely to send shockwaves through the European gas industry.
The Office of Competition and Consumer Protection (UOKiK) said Oct. 7 it had also imposed a total of Zloty 234 million in fines on the five western European companies it says are financing the pipeline.
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UOKiK said its own investigation had shown that Gazprom, France's Engie, Austria's OMV, Shell, and Germany's Uniper and Wintershall Dea had concluded a number of agreements regarding financing for Nord Stream 2 without having first obtained its approval to establish a joint venture for the project.
When they failed to gain UOKiK's approval, the companies decided to complete the project in a different form to work around the requirement to obtain that consent, the watchdog said.
Nord Stream 2 does not go through Polish waters but UOKiK has broad powers under the country's competition law and it has the right to rule on the business impact of the pipeline because some of the companies have assets in Poland.
"In December 2015, when the establishment of the joint venture was first reported, the participants specified their 'intention to concentrate' that has remained a part of their plans ever since. Each subsequent move was only an attempt to alter the form of their participation in the scheme," UOKiK President Tomasz Chrostny said in a statement.
In a statement Oct. 7, Gazprom said it "fundamentally disagrees" with the position of the Polish antimonopoly authority.
"Gazprom and European companies are accused of setting up a joint venture for the implementation of the Nord Stream 2 project, which has not been approved by the Polish authorities. In fact, the project was implemented not by a joint venture, but by a subsidiary of Gazprom with the attraction of debt financing," it said.
"The UOKiK decision violates the principles of legality, proportionality and fair trial, and the unprecedented amount of the fine indicates a desire to oppose the implementation of the Nord Stream 2 project by any means," it said.
Gazprom said it would use its right to appeal the decision, arguing that it had not violated Polish antimonopoly legislation. "When appealing against the UOKiK decision, it is not subject to execution until the entry into force of the relevant court decision," it said.
OMV told S&P Global Platts that it had received the decision from the Polish anti-monopoly authority and would analyze it in more detail.
"OMV is of the clear opinion that it has complied with all applicable laws," it said.
The four other companies involved could not be reached for immediate comment.
Nord Stream 2 funding
In 2016, Gazprom signed agreements with the five companies to finance half of the cost of Nord Stream 2, with each of the five companies contributing Eur9.5 billion.
After UOKiK rejected the consortium's request for approval, the five companies became parties to the financing agreements whose terms and conditions enabled them to take over the shares of Nord Stream 2 at a later stage of the project, UOKiK's Chrostny said.
"If the project were solely of a financial nature, then Gazprom could easily obtain financing from the government of the Russian Federation or from commercial banks. Perhaps they would be able to pull it off on the
ir own. It needs to be stressed that operating as a financial institution is not the core activity of the remaining participants. First and foremost, Uniper, Engie, OMV, Shell and Wintershall are customers, and sometimes also competitors of Gazprom on the gas market," Chrostny said.
"The fact that a joint venture is financed by participants of the gas market and not by financial institutions proves that all the entities involved share the same economic interests. Without the participation of those entities, Nord Stream 2 would not be able to operate and to pursue the gas pipeline construction project in the EU, meaning that most probably it would not be established at all," he added.
UOKiK ordered the six companies to terminate their financing agreements for the pipeline within 30 days. If the companies decide to appeal against the decision, the deadline expires 30 days after it becomes legally valid.
Chrostny said the six companies' actions had negatively impacted competition on Poland's gas market and the launch of Nord Stream 2 would threaten the continuity of gas supplies to Poland and raise gas prices on the Polish market.
"Completion of this investment project increases the economic dependence on Russian gas -- not only in the case of Poland, but also of other European states. As far as energy security is concerned, the undertaking splits Europe into two parts, with the border located on the Odra river. It is astounding that Western corporations fail to understand that and participate in an undertaking that not only disturbs competition on the market, but also poses a threat to Europe's energy security," he said.
In August, UOKiK imposed a Zloty 213 million fine on Gazprom for failing to provide requested documents in the watchdog's investigation into the construction of Nord Stream 2.
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Source : Platts