Gazprom shares down as EU opens antitrust probe

Shares in Russian oil and gas giant Gazprom suffered their biggest drop in five weeks Wednesday, on news that it is the subject of a European antitrust investigation.

The European Commission, the executive body of the 27-country European Union, is investigating whether Gazprom blocked fair competition in the gas markets of Central and Eastern Europe. The Commission said Tuesday it "has concerns that Gazprom may be abusing its dominant market position in upstream gas supply markets."

Gazprom, whose shares were down 1.7 per cent to 155.3 roubles Wednesday afternoon, has already been under pressure for its pricing policies, which many customers found too rigid. Some of Gazprom's clients have threatened with lawsuits while others have been successful in getting discounts.

The company has also restricted gas supplies to its neighbors several times amid pricing disputes. In January 2009, Gazprom's supplies to Ukraine and its European customers were halted for nearly 20 days before the two countries hammered out a deal.

EU officials last year raided officers of Gazprom's European customers in Germany, Poland and Hungary but Gazprom was not named as the target of the investigation at the time.

The European Commission's investigations can take months or even years to complete. Analysts at Russia's Troika bank warned that, if found guilty, Gazprom could either be fined 10 percent of its annual revenues in the countries in question, or settle out of court by "giving some concessions on marketing of its gas and perhaps pricing".

Gazprom said in a statement on Wednesday that it hasn't been officially notified of the probe yet. The Moscow-based company said that it hopes the investigation will respect its "rights and legitimate interests proceeding from EU laws as well as international legislation."

Alexei Kokin from Moscow-based brokerage UralSib said in a note that the investigation could prompt Gazprom to revise its spending plans and improve management to make up for potential losses.