BRUSSELS EU antitrust regulators said on Monday concessions by Russia's Gazprom (GAZP.MM) aimed at avoiding fines should allay concerns of market abuse, signalling a thaw in business ties between Moscow and Brussels despite tensions over Ukraine and Syria.
The provisional deal, which is subject to feedback from some EU states and market players, moves closer to ending one of Brussels' longest-running antitrust probes that began with raids on offices in 10 countries in 2011 and culminated in charges Gazprom, which supplies a third of the EU's gas, had abused its dominant position.
If the deal comes into force, Russia's state gas exporter will escape fines of up to 10 percent of its global turnover - an outcome likely to anger Poland and eastern EU countries which have sought a tougher line from Brussels.
Eight member states in the east at the centre of the case, all formerly dominated by Moscow, now have until May 4 to object to the European Commission's view and could seek changes in the deal.
Europe's Competition Commissioner Margrethe Vestager, who has brought actions and levied fines against major multinationals such as Google (GOOGL.O), said Gazprom's offer met concerns and provided "a forward looking solution".
"Combined, we think that these measures are important improvements to ensure the free flow of gas at competitive prices," Vestager said
The legally-binding deal would entail Gazprom bowing to EU conditions to do away with terms barring countries from exporting its gas to other countries; tying contracts to investments in pipelines; and monopoly pricing in the three Baltic states, Bulgaria and Poland.
The fight over pricing and destination clauses have been the toughest issues in high-level talks between Vestager and Russian officials that have dragged on for years to find a compromise.
As part of the deal, Gazprom pledged greater transparency on prices. It will allow clients to renegotiate decades-long, oil-indexed contracts - opposed by the Commission. Prices would be linked to benchmarks such as European gas market hubs and border prices, including in Germany.
Gazprom deputy head Alexander Medvedev said in a statement the commitments "demonstrate our willingness" to soothe the concerns of EU regulators and to closing the case soon.
'APPEASE RATHER THAN CONFRONT'
Within a bloc divided over its stance on Russia, some EU nations see the move towards a settlement as running counter to calls for more sanctions on Russia over its bombing in Syria.
"The fundamental question is how friendly are we going to be with Gazprom," one senior EU diplomat said, voicing dismay that Vestager had chosen to fine Google but not Gazprom.
Vestager said during a news conference that her view was purely based on enforcing EU law and not influenced by politics.
With a settlement, Russia would accept EU authority in applying competition law - something it has long balked at.
If Gazprom fails to comply, the EU could resort to fines without reopening its case as it did when it imposed a 561 million euros ($731 million) penalty on Microsoft for breaking its promises.
One EU official described the attitude in Brussels as "it's better to appease than confront" its eastern neighbour.
But EU officials said they were bracing for tough feedback from some nations, with Poland already locked in a court battle with the Commission over what it views as lenient treatment of Gazprom in another case.
In the so-called "market test", Gazprom's competitors and governments in Poland, the three Baltic states, Bulgaria, Hungary, Slovakia and the Czech Republic have the right to weigh in. They will have seven weeks, almost twice the normal time, in part due to elections in Bulgaria, officials said.
In recent years, Gazprom has changed some of its more contentious behaviour under pressure from increased competition from liquefied natural gas imports, price arbitration cases brought by western customers and more liquidity on Europe's energy markets.
But EU regulators say those do not extend to the region, where some countries are almost 100 percent dependent on Russian gas imports.
In addition to the antitrust case, the Commission has proposed legislation that will allow Brussels to vet bilateral energy deals between EU nations and countries such as Russia - as such agreements are not covered by competition law.
That is why EU regulators said they had no power to tackle disagreements over the Yamal pipeline between Russia and Poland.
However, Gazprom has offered not to seek damages from Bulgarian partners over the cancellation of the planned South Stream pipeline under the Black Sea.
(Editing by Susan Thomas and Mark Potter)