Gazprom faces USD 1.17 bln fine

Russia’s state-owned gas giant Gazprom is facing a fine of between USD 78 mln and USD 1.17 bln from the Federal Anti-monopoly Service (FAS) after it discovered that the gas incumbent and four of its pipeline manufacturers are engaged in price fixing, Russian business daily Vedomosti reported March 18.

“Pipeline manufacturers proved that due to agreeing the time-lines beforehand [with Gazprom] they were able to plan investments and production development,” the FSA wrote, enumerating the positive effects of price fixing, according to Vedomosti.

The investigation was launched in 2011 after FAS uncovered troubling documents in a surprise inspection of Gazprom’s subcontractors. The audit discovered documentation, which proved that between 2008 and 2011 pipeline manufacturers were secretly agreeing contract specifications and deadlines with Gazprom.

This way, the four manufacturers were given enough time to prepare their best-suited offers for public tenders issued by Gazprom, and were subsequently awarded lucrative contracts.

The fines under Russian law for price fixing range from 1 per cent to 15 per cent of the value of pipeline sales per annum, which amounts to between USD 78 million and USD  1.17 billion, according to Vedomosti.

Despite the fact that price fixing was in this case reportedly proven, it looks as though neither Gazprom nor its partners, implicated in the scandal, will be paying the fine any time soon.

FAS stated in its report, that the practice seems to bring many advantages.

“A new industry sector was created in Russia, production facilities increased their product-lines and improved their quality, 6,000 new jobs were created and tax income was boosted,” Vedomosti wrote citing FAS.

“Moreover, the prices of Russian pipelines are lower than those of foreign products, favoring Russia’s domestic production,” the institution concluded in its statement.