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Competition office looks into growing liquefied gas prices

Russia’s competition office has launched a probe into soaring prices on liquefied gas, a market largely controlled by Gazprom and SIBUR.

The investigation may give the Federal Anti-Monopoly Service grounds to fine the companies up to 15% of their annual turnover, up to $70 million in total. Wholesale liquefied gas prices in some Russian regions went up an average 45% while retail prices rose 15%. The Federal Anti-Monopoly Service has sent inquiries to Gazprom and SIBUR, the country’s major liquefied gas producers, to find out reasons for the price hike. Some 9.5 million tons of liquefied gas worth over 40 billion rubles ($1,5 billion) is produced in Russia every year, Raiffeisenbank said in recent report. SIBUR produces 31% of the total amount, Gazprom 24% and LUKoil 9%.

Anti-Monopoly Service Deputy Director Anatoly Golomolzin said in an interview with Kommersant, that “results of the probe are difficult to predict.” The companies are to respond to the inquiries in seven days. Another week will be needed to analyze the information. Possible violations will bring about sanctions, Golomolzin added. Gazprom would not comment reports. SIBUR said it is not afraid of sanctions because the price rise was caused by seasonal repairs at gas refineries as well as galloping world gas prices in June and July.

The situation on the liquefied gas market may give the competition office an opportunity to use turnover fines for the first time since they came into effect on May 13. Monopoly-related violations now carry fines from 1 to 15% of the company’s annual revenue in the segment where violation was recorded. The fine, however, cannot exceed 2% of the company’s total revenue. The annual turnover of Gazprom’s Gazenergoset on the market came to 5.5 billion rubles, which sets the top fine at $30 million. The top fine for SIBUR may reach $40 million.

The Anti-Monopoly Service looked into the liquefied market in 2005 when it accused SIBUR and Gazprom of abusing its dominance on the market. Motions to seize 150 million rubles of illegal revenue from the two firms are still pending in courts. (kommersant.com)