Putin Vs. the European Competition Commission

Is Vladimir Putin really going to take on the European Union's Competition Commission? If so, the Kremlin should be careful that it has not bitten off more than it can chew.

The Commission and Russia's Gazprom are now at loggerheads, as I explain in my latest Letter from Europe. At issue is how Gazprom, Russia's state-owned energy company, allegedly abused its powerful position in Eastern and Central Europe by blocking competition.

The decision by DG Competition, as the Directorate General for Competition is known, to go after Gazprom is important for what is says about the Commission and what it means for Russia.

The Competition Commission is fiercely committed to fair competition. Remember how it challenged Microsoft. It also challenged Europe's most powerful energy companies, especially in France and Germany over how they had sewn up the energy sector.

At one stage, say energy experts, DG Competition had such damning evidence of the big German en ergy companies abusing their market position that it proposed to make the reports public unless the companies changed their ways. The threat worked. Germany now has a competitive and open energy sector.

Gazprom is one of the last remaining energy companies on DG Competition's list. While the company held a tight grip over the energy sector throughout most of Eastern Europe, in Western Europe, where it has subsidiaries, Gazprom has had to play by the rules in an increasingly competitive sector.

What these antitrust proceedings against Gazprom mean for Russia is another matter. Mr. Putin, so far, is standing firm.

But if - and this is a big if - Russia is serious about modernization, surely the Commission's proceedings are a push in the right direction. After all, say analysts, modernization is not just about upgrading the country's infrastructure. It is also about the rule of law, transparency and competition.

“It's just so hard to tell if this case could be a tool for modernization,” said Szymon Kardas, a Russian expert at the Center for Eastern Studies in Warsaw. “There is already a debate amongst the Russia elites about how modernization would affect the Kremlin's control over strategic sectors, such as energy.”

All the more reason to keep track of DG Competition's proceedings against Gazprom.