How a BRICS country defeats EU Commission & the rule of law

South Stream pipeline

South Stream pipeline

According to various reports, the European Commission (specifically, its top management in the energy DG [Oettinger] and its president [Barroso], as well as others) has caved to the Russian energy powerhouse GAZPROM.

N.B.: (1) Yes, this relates to Africa.  (2) And yes, this relates to competition.

It relates to competition because the pending antitrust investigation by Mr. Almunia, already hamstrung, is clearly hampered by this development from its adjacent energy DG.  One Commissioner has caved, and another (a lame duck by now, who has already announced his retirement from the entire realm of politics) will not even bring a conclusion to his DG’s investigation into GAZPROM.  Putin and his friends at the gas giant have (now successfully) challenged the European energy and competition ministers, effectively saying to them: “We will break your laws, and there isn’t a thing you can do about it.”

It relates to Africa, because this is the story of how a BRICS country state-owned enterprise (or at least de facto SOE) is fully capable of defeating the “rule of law” that European proponents of the superiority of Western legal systems often tout.  Is EU law hard and fast?  Unbreakable?  Strictly enforced?  Without exceptions, for special friends (or powerful foes)?  All the common criticisms that are levied by eurocrats against developing African judicial systems are brought to the fore by this abject failure of the EU to uphold its own laws vis-a-vis a stronger opponent.

Banana Republic Brussels

The answer to the rhetorical questions posed above is – quite clearly as of today at least – a resounding “no“:

The EU has caved.  EU laws can be broken.  Without any consequences.

Until recently, the GAZPROM contracts with EU member states for its (63 billion cubic metres of gas per year) “South Stream” Project violated EU law, according to prior statements of the relevant EU Commissioners and their spokespeople.  The main concerns (here from the energy perspective, not the competition issues) were:

  • ownership unbundling rules violated by Gazprom being both a producer and a supplier of gas that owns simultaneously production capacity and its own transmission network
  • 3d-party non-discriminatory access endangered by Gazprom being exclusive shipper
  • South Stream’s pricing structure violates EU energy tariff rules

Yet, after some diplomatic prodding and economic threats, the Commission now has changed its tune and is literally giving GAZPROM a “get-out-of-jail-free card.”

“Gunther Oettinger, the European Commissioner for Energy, told Vedomosti newspaper that Moscow and Brussels will find a solution to honor previous intergovernmental agreements Gazprom has made with European transit countries.” (Source: Vedomosti newspaper, as quoted by rt.com)

Contrast this with what Mr. Oettinger said back in 2011 (note that he also (1) called South Stream a “phantom project” and essentially didn’t believe the Russians would go ahead with its construction in 2012, and (2) was quite clear in his understanding of how market participants operate: “money talks,” baby!):

I understand that certain EU Member States entered into bilateral agreements with the Russian Federation which may partially contradict these principles. If this is true, these Member States will nevertheless have to apply the internal market rules and they are under an obligation to bring their IGAs in line with the EU legislation. (Source: His own speech)

Even more tellingly, contrast the green light now given to the project with Mr. Oettinger’s spokespersons’ statements from December 2013 and even August 2013:

“The Commission has looked into these intergovernmental agreements and came to the conclusion that none of the agreements is in compliance with EU law,” Borchardt said.

“That is the reason why we have told these states that they are under the obligation, either coming from the EU treaties, or from the Energy Community treaty, that they have to ask for re-negotiation with Russia, to bring the intergovernmental agreements in line with EU law,” he added.  (Source: EurActiv)

Lesson (not) learned

How to wrap up a piece that essentially sounds the death knell of the rule of law in the EU, especially in Brussels?  Well, since this is an AfricanAntitrust.com post (this could arguably be published anywhere), the focus should be on EU lessons learned on the African continent.  The key take-away here may be this:

Very simply put: any African (or other BRICS or BRICS-like country) negotiator dealing with an official EU delegate as his or her counterparty should keep the “GAZPROM incident” in mind when faced with a lecture on the superiority and objectivity of EU law over whichever domestic judicial system may be at issue.

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