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According to Telegraph (an account is required to read the whole article), Gazprom seemed to have created an important pressure by using different gas prices for different EU countries:

Vladimir Putin’s abusive stranglehold over European gas supplies has been laid bare by explosive EU documents, exposing deliberate violations of EU law and a pattern of political bullying over almost a decade.

The longest investigation in EU history found that the Kremlin-controlled energy giant Gazprom has used its enormous power to pressure vulnerable states in Eastern Europe, and to fragment the EU’s unified energy market with coercive pricing policies.

The report suggests that Germany has been enjoying a sweetheart deal with Gazprom, gaining a competitive advantage in gas costs at the expense of fellow EU economies and leaving front line states at the mercy of Moscow's strong-arm tactics.

However, Gazprom's policy of quite different gas prices for different countries is not a surprise (e.g.):

Romania pays the highest price in the area for natural gas and the fourth in the European Union and the only source of gas is Russia’s Gazprom, European Commission’s DG Energy report shows.

This article seem to confirm the alleged good prices for Germany:

Gazprom’s average European gas price was $182.50/1,000 cu m in the first half of 2016, Gazprom’s average price for 2016 is estimated at around $165-$170/1,000 cm. (..) Germany gets most of its gas from Russia, went as low as $145/1000 cm($4/MMbtu) or about 20% less than the spot price at the UK NBP hub.

Note: The same article argues that the exact prices for European countries is not known, so it is unclear how the first sources got their data:

Gazprom does not disclose the prices it charges its European clients, only an average price charged for its European customers.

Question: Why does EU Commission seem to allow quite different Russia gas prices for EU members?

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    The short answer answer is: it is not EU Commission to decide. – seven-phases-max Apr 14 '18 at 10:24
  • @seven-phases-max, the EU would have an interest if what is going on did violate EU regulations, e.g. anti-trust regulations. Merely selling the same product at different prices depending on how much you take where is nothing new; a bottle of soft drink in the supermarket is cheaper than a smaller glass of the same drink in a restaurant. It becomes another matter if wholesalers charge more for restaurants than supermarkets, all other things being equal. – o.m. Apr 14 '18 at 12:57
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    @seven-phases-max, not quite. Companies are not allowed to do business in the EU if they don't follow the rules, and some discriminatory pricing would break those rules. – o.m. Apr 15 '18 at 5:13
  • @o.m. OK, I guess you convinced me (even if this is just impossible in practice for the particular company). – seven-phases-max Apr 15 '18 at 9:40
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It is an interesting question to determine if those gas deals are contracts between companies or between states. Given the nature of the power and gas industry (vital national infrastructure, long-term investment, and all that) the answer probably falls somewhere in between.

Market Forces

When it comes to gas, the producer-consumer relationships are extremely long-term. Pipelines take decades to plan and build, and it isn't easy to change the direction of flow, either. Germany or any other consumer cannot simply decide to buy from another producer, and Russia or any other producer cannot simply decide to sell to another consumer. German power companies, with the backing of the German government, made contracts to deliver pipes for pipelines to the Soviet Union (... that long ago) in exchange for preferential gas prices, and since then both sides have a vital national interest in a stable, predicatable exchange of gas for money.

  • The Russians need German money just as much as Germans need Russian gas. They are confident that the Germans can and will pay as long as they deliver.
  • If push came to shove, Russia might be forced to flare the gas while German power plants might have to shut down after the strategic reserve is exhausted.
  • Russia has no interest to encourage Germany to develop other sources of gas supply (build LNG terminals, build pipelines through Turkey, etc.) and Germany has no interest to encourage Russia to develop other consumers of gas (built pipelines to China, etc.).

If one assumes that gas is a commercial market without political interference (which I do not), it would still be logical to expect different prices for delivery to different pumping stations.

  • The market price depends on supply and demand, and also on the relative ease of substituting other suppliers. Shipping LNG from America or the Middle East to the Netherlands will be cheaper than shipping LNG to Lithuania, so Russians can demand higher prices in Klaipeda than in Rotterdam before they are underbid by other providers.
  • Another factor is the cost of transport. In this regard, Klaipeda should see lower prices than Rotterdam, because it is easier to deliver Russian gas to Lithuania than to the Netherlands.

Those are just two examples why prices would differ. The "fair market price" depends on all of them.

Political Factors

But of course politics matter. Russia has an interest in what happens in their "near abroad" and they use energy prices to reward or punish foreign behaviour. That's where projects like Nord Stream come into play, which would allow Russia to supply Germany without pumping through Belarus or the Ukraine.

  • Transporting Russian gas westward is big business for the transit states.
  • In an emergency, transit states could also use gas flows intended for Germany to heat the homes of their citizens, instead. Right now Russia couldn't stop gas supplies to the Ukraine without also stopping gas to much of Europe.
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    To slightly expand (and this could be a valid argument for the EU-comission as well), Germany is closer to Russia than some other member states, it has a history of being a reliable partner that purchases large volumes of gas (largest customer in EU IIRC), therefore it's given the best deal. – LLlAMnYP Apr 16 '18 at 7:49
  • @LLlAMnYP, if one assumes/pretends that we're talking about purely commercial transactions, one would have to look at each gas-reselling company, not at the national aggregates. – o.m. Apr 16 '18 at 14:53
  • I'm not sure, which gas reselling companies you refer to. Specifically in Russia only Gazprom is permitted to export natural gas abroad (though Rosneft would really like to). – LLlAMnYP Apr 17 '18 at 9:36
  • @LLlAMnYP, with resellers I was thinking of the European companies which buy gas in bulk and re-sell to end consumers. A home owner with gas heating doesn't buy from Gazprom, he buys from the local power and gas company. – o.m. Apr 17 '18 at 16:23
  • In that case I'd have to disagree, IMO all that's really relevant to what looks like the essence of the question is precisely the national aggregates and how they do business with Gazprom. The relationships between the aggregates and resellers are really the internal business of the states. – LLlAMnYP Apr 17 '18 at 19:14
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EU is not yet totally authoritarian, so EU Commission could not dictate prices

In free market, seller of goods could freely decide does he want to sell to any particular buyer and at what price. Of course, buyer has same right to discriminate between sellers as he pleases.

There is a recent push from globalist to coerce sellers and service providers to relinquish their freedom - most famous case was forcing bakers to sell wedding cakes to homosexuals.

Russia is of course too big to be pushed this way, although there is a pressure on EU countries to use much more expensive US gas instead of Russian. This especially holds true for Germany, as using US gas would almost make certain German industries out of business .

German chancellor Angela Merkel is trying to balance between commands of globalists (sanctions against Russia at any costs) and needs of German economy. Therefore, German government is not yet ready to fully sacrifice market rules. As Germany holds most sway in EU, EU commission certainly respect German wishes.

Other EU members, which are more under influence of US and less independent (Poland, Baltic countries etc) could either buy gas from Russia at bigger prices then Germany, or try to find other sources (US, Qatar etc.. ) which are generally even more expensive.

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