EU questions politics of Gazprom’s Nord Stream 2 pipeline project

By MARTA WALDOCH and EWA KRUKOWSKA
Bloomberg

Russia’s push to expand a natural-gas pipeline that circumvents Ukraine would undermine energy security in eastern Europe, according to European Commission Vice President Maros Sefcovic.

The commission is analyzing the legal and political implications of the Nord Stream-2 project, which export monopoly Gazprom is pursuing with western European companies ranging from Germany’s EON to Paris-based Engie.

The EU’s regulatory arm needs, among other things, more details on the justification for the expansion given that the existing infrastructure uses only around half of its capacity, according to Sefcovic, who oversees the bloc’s energy policies.

“We need to know if there is some kind of intention to close down the Ukrainian transit, what this project may mean for Ukraine and central Europe,” Sefcovic told a conference on Thursday in Sopot, Poland. “The eastern European countries will clearly have their energy security decreased.”

The planned expansion of pipelines carrying Russian gas to the EU drew criticism earlier this year from east European nations including Slovakia and Poland. The project hurts EU cohesion and weakens the bloc’s Energy Union strategy aimed at integrating the region’s gas and power markets and ensuring adequate supplies, a group of Polish members of the European Parliament said in a written question to the commission last week.

Ukraine Separatists

Gazprom, EON, Engie, Royal Dutch Shell, OMV and BASF signed an agreement in September to expand Nord Stream by 55 billion cubic meters/year, which would double its capacity to almost 30% of current EU demand. Ukraine, struggling to avoid a default amid a conflict with Moscow-backed separatists in the country’s east, would be deprived of $2 billion/year in transit fees while Slovakia would lose hundreds of millions of euros, according to the leaders of the two nations.

Russia currently ships about a third of its Europe-bound gas via Ukraine, down from about two-thirds in 2011, when the Nord Stream pipeline under the Baltic Sea started supplying Germany directly. Eastern members of the EU suffered shortfalls at least twice in the past decade during price spats between the two former Soviet partners.

Nord Stream-2 is set to start deliveries in 2019, when the current agreement between Russia and Ukraine on gas transit ends. Gazprom head Alexey Miller said in June that Russia is ready to discuss a new contract with Ukraine once the current one expires.

While the new route under the Baltic Sea won’t need any approval from the commission, the onshore links connecting the pipeline with the region’s network will need to comply with EU laws on energy markets. Gazprom is currently able to use only half of a pipeline called Opal in Germany that’s linked to Nord Stream because European rules require access for competitors.

Commission Support

“We hope very much that the European Commission will not put a spoke in our wheel but, on the contrary, will support us,” Gazprom deputy head Alexander Medvedev said in an interview on Tuesday.

Sefcovic, whose travel to Poland this week is a part of a Europe-wide tour to promote the energy-union strategy, said EU national governments agreed that the preservation of gas transit through Ukraine is of “utmost importance” to the bloc.

“It will be in the interest of all of us to look into the comprehensive solution for energy security, which should cover all member states, all European countries; not just a few,” he said.

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