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A hurdle for Gazprom

• Mark Mardell
• 20 Sep 07, 12:10 AM

鈥淭hey saw : of course are going to sit up and take notice.鈥�

I was both pleased and irritated by the comment from a very senior insider in the European Commission.

Pleased because it confirmed a pet theory I鈥檇 had on Monday that the court鈥檚 decision would embolden the commission to take tough measures in the energy market.

But irritated that I had ripped this thought out of my TV piece on Monday after being told by rather more junior insiders that there was no read across between the two issues.

Relations are not good between . What have we had since that last , when things were so bad that there was no joint declaration at the end? . The . Now the commission is talking the sort of language that Eastern Europeans think Russia needs to hear.

is intended to give the EU a bit of leverage and put pressure on President Putin.

For years the EU has been trying to get him to sign up to the . He rejected that at , that time in Finland. Then Georgia and the murdered Russian journalist were top of the list of irritating grit that failed to produce a pearl.

The second best thing would be if he signed up to the essential bits of it in a new partnership agreement. But there has been no progress there either.

But behind all the worries lurks the fear of a new cold war. And I mean 鈥渃old鈥� not as in lukewarm relations but lukewarm homes and baths. The Russian giant feared by Europe is not its giant army but its giant energy company.

Gazprom supplies a quarter of Europe鈥檚 energy needs and every conceivable projection shows it will supply more and more in the future. It wasn鈥檛 the cold alone that caused shivers to run down European spines when and hit Western Europe as well. There was a less publicised incident at the beginning of this year when were disrupted. The power of Gazprom to hurt Europe for political or commercial reasons is really dreaded.

The plans for energy liberalisation raised another worry. What if the commission gets its way and and all the rest of them dutifully split off their generating side from their distribution networks - and Gazprom swoops in and scoops up Europe鈥檚 grid? They wouldn鈥檛 just be able to turn the taps off, they鈥檇 own the pipelines as well.

This is the commission's answer: 鈥淣on-EU companies cannot own a controlling stake in an EU network unless international agreements are in place, which explicitly allow for this situation."

Perhaps something a bit like, well, an energy charter?

But the killer is this, a totally hypothetical company seeking to own a controlling stake would also have to be broken up, just like its European counterparts.

Another quote from the commission: 鈥淭hey will have to demonstrably and unequivocally comply with the same unbundling requirements as EU companies.鈥�

This is a hurdle set so high that Gazprom cannot jump it.

No surprise then that the Russian company has issued a tetchy statement saying it will examine the implications for price and energy stability, and that the company 鈥渇eels certain that its voice will be heard鈥�.

Some in the know think Gazprom has misread the runes and thinks that the German government will stop this in its tracks. One source tells me: 鈥淭hey鈥檝e forgotten it's Merkel not Schroeder in charge now.鈥�

It should make for a very interesting summit in Portugal in October.

But this story of energy liberalisation shows something else about the European Union. Whether on competition or on climate change they are setting a global pace.

You may dislike that pace, and you may not regard the EU as a force for good, but you cannot deny that it is making the running. In worldwide business law it seems the highest, not the lowest common denominator is what counts.

The connection between Microsoft and Gazprom is that the European Union is the toughest regulator in the world, and like it or not, it is making rules that companies, whether based in Russia or America, will have to follow.

Listen to my interview with commission president Jose Manuel Barroso here.

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