Mafia state dictator Vladimir Putin's money machine Gazprom is in for a rough ride:
Europe has argued that Gazprom manipulates prices for political gain, and the European Commission is set to release the results of a two-year investigation this month that's expected to demonstrate substantial evidence that Gazprom is breaking European laws. After that report is released, the EC could take action relatively quickly.
"I think we are going to see, first of all, a spectacular lump of bad publicity for Gazprom, because the complaints will list all of the bad things that Gazprom has been doing," Edward Lucas, the editor of The Economist, told Radio Free Europe in an interview. "Then we will have fines, which may be very substantial, and there will also be the opportunity for the companies that have been overcharged for gas to launch lawsuits against Gazprom over the extortionary prices that they have been charging."
The European Commission could seek fines against Gazprom and/or a change in pricing structure. Gazprom has long linked its prices to the price of crude oil and has signed up countries to long-term contracts, which are often expensive.
But as the spot market in Europe has grown as a result of a flood of Qatari LNG -- which was once destined for the US until shale gas came about -- Russian gas is no longer the only game in town. Purchases of natural gas on the spot market have shot up from just 15% in 2008 to 44% in 2012. This has Gazprom's gas contracts looking more and more expensive and even extortionary, as Lucas points out. Eastern European countries often pay one-and-a-half times more for natural gas than does Western Europe.