The action announced today by the European Commission is an important step in safeguarding European energy security. Gazprom’s actions on EU territory inflict serious damage to competition in the entire region.
Naftogaz has for years faced the detrimental effects of Gazprom’s dominant position in both EU and Ukrainian markets. At present, Gazprom is refusing to provide Naftogaz with shipping code pairs which prevents the signing and implementation of interconnection agreements compliant with EU energy regulation that would allow establishing virtual reverse flows (back-haul) between Slovakia and Ukraine.
With the support of the European Commission, last year Ukraine and Slovakia managed to establish unobstructed physical gas flows between the countries in the west-to-east direction through a bypass pipeline (which has supplied the bulk of Ukraine’s gas imports in 1Q 2015). Before this solution was launched, Gazprom used its monopoly position to charge Ukraine prices up to double the market level. By blocking virtual reverse flows in Slovakia, Gazprom deprived European suppliers of their potential share of the sizeable Ukrainian market over the past years.
EU natural gas suppliers still have limited ability to compete for the Ukrainian market. This infringement on competition is created by Gazprom unlawfully performing some of the key functions of a TSO in Slovakia and by its refusal to provide Naftogaz with shipping code pairs which are necessary to remedy the situation.
The competition infringement concerns not only the Ukrainian market. Naftogaz and Ukrtransgaz, the Ukrainian TSO, have received requests from EU gas trading companies to organize gas flows through Ukraine between Hungary, Poland, Bulgaria, Greece and Turkey. Therefore, because of Gazprom’s uncompetitive behavior EU companies cannot use the available infrastructure to freely trade in other EU and non-EU markets.
Public Relations Department
National Joint-Stock Company «Naftogaz of Ukraine»