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01/10/2016

Sefcovic: The Commission will respond to Nord Stream’s critics

Central Europe

Sefcovic: The Commission will respond to Nord Stream’s critics

Maroš Šef?ovi? [European Commission]

Seven EU countries wrote to the European Commission, asking for the Nord Stream 2 pipeline project to be stopped. The entire College of Commissioners will prepare the response, Maroš Šef?ovi?, Vice-President of the European Commission for Energy Union, told EurActiv in an exclusive interview.

Maroš Šef?ovi? is a Slovak diplomat and the Vice -President of the European Commission, in charge of Energy Union. He was European Commissioner for Interinstitutional Relations and Administration from 2010 to 2014.

He spoke to EurActiv’s Senior Editor, Georgi Gotev.

The Nord Stream 2 project is becoming more and more controversial. Seven countries from Central Europe have taken positions against it, and their foreign ministers wrote to you. I have also heard opinions that there are differences between yourself and Energy Commissioner Miguel Arias Cañete, who says that the project doesn’t give rise to any problems as long as it is compatible with EU law, whereas you are reported to believe that it is not in line with an EU Energy Union. Are you in such disagreement?

We have the same views on this project and we are collaborating on this very closely. We are discussing it very frequently. The position of the European Commission is very well and clearly reflected in the state of the Energy Union report. And it’s not only Commissioner’s Cañete position or mine, it’s a position adopted by the whole college [of Commissioners].

If you look how we approach this issue, concerning the importance to respect EU law, or the importance we attach to preserving the gas transit route through Ukraine, and the focus we put on diversification of sources and routes of supply as our primary tool to increase the energy security in Europe, I think you will find it very well reflected in that official communication, which was already presented to the Council of Ministers and to the European Parliament.

I’m aware of this document, but when you say “preserving the transit route through Ukraine”, you are aware that Nord Stream seeks the contrary, it intends to terminate this transit for good.

This is why this project is raising such political attention. It’s true that the statements from the Russian Federation in the beginning of this year have been very much highlighting 2019, when new transit contracts will need to be negotiated between Ukraine and Russia. And because of the tensions that were at that time very much present in Ukrainian-Russian relations, there have been several statements calling for the bypassing of Ukraine.

Since then, following statements not only by the Commission, but from the Foreign Affairs Council, there have been statements from the Russian Federation highlighting the fact that Nord Stream 2 should compensate for the lower extraction rates from the North Sea and from the Netherlands, and that the transit route through Ukraine should be preserved.

So we have seen a certain evolution of these ideas. Now the issue is how the EU law will be respected and how the transit through Ukraine will be maintained.

But Ukraine says that it doesn’t need to buy Russian gas. They have their own sources, they use reverse gas flows, they will rely more on energy efficiency. Isn’t that a bit of a contradiction, if the goal is to maintain the country’s transit role? And in this letter by the ministers of the Central European countries, isn’t there also an economic aspect, because by increasing the availability of Russian gas via Nord Stream 2, this will reduce the profitability of gas imports from alternative sources, and of the new projects of diversification.

When it comes to the supply of gas [by Russia] to Ukraine, I have to say that so far everything goes is in line with the trilateral protocol we agreed in September. From the beginning of the winter package, Ukraine was buying gas from Gazprom. Now it has more than 16 billion cubic metres in its storage, which is more than they had last year at the same time. It was also understood in our trilateral talks that Ukraine would buy as much gas as it would need, to satisfy the domestic consumption, and also to secure the safe transit of the Russian gas through Ukraine to Europe.

So now we are at the stage when Ukraine is analysing the market, and we can offer them the most competitive price. At the same time, they are measuring how much gas they would need until the end of the winter. Because of the energy efficiency measures introduced, because of the new laws enacted, they are in a new situation and they would buy gas on the basis of their needs.

Next year what would be decisive would be the price, who will offer the best price and it will be up to the Ukrainians to decide from whom they will buy.

Russia seems to have changed it strategy. Instead of building pipelines on EU territory they are bringing gas at EU’s borders and will sell it at spot price. Isn’t that positive in itself?

Right now we need to clear up the first set of issues, the key parameters of the Nord Stream project’s compliance to EU law, and then we will move to the next debate. What I hear from the countries who voiced their concern in their letter from yesterday is that their first concern is energy security, the gradual drying up of the Ukrainian route, the loss of the biggest transit route [of Russian gas] to Europe.

We are moving from three major routes: Nord Stream, Yamal [via Poland] and the Ukrainian transit routes to two. And that entails congestion and bottlenecks on the way from Germany to Central and Eastern Europe, not speaking about the loss of revenues for Ukraine and other transiting countries.

Therefore I think it’s very important to look to a comprehensive solution, when it comes to gas balance and energy security for all EU member states, and not a few.

It looks like Russia, with the help of European companies, is co-shaping the European energy architecture, at a time when you are trying to push forward the EU Energy Union. It’s quite a challenge?

What we see is clearly proof that the EU market is extremely interesting for the energy exporters. Because we are the biggest importer, we pay on time, we pay in hard currency and we still pay a high price for gas. With our push for diversification of supplies, and goal of completing the internal energy market, we also triggered the fight for market share on the European market. That’s the reason why we have seen several proposals for different “Streams” coming from the Russian side.

That’s why I think we are on the right way with opening of Europe more for energy imports, to be very much present on the global energy market, so we can profit more from increased competition, from better services and from more competitive prices. We in Europe will be eventually paying prices which are much more comparable to the energy prices which our main economic competitors are paying at the same time.

What will be the follow-up to the letter of the seven ministers? You will need to respond to it, right?

Of course. The topic of Nord Stream is extremely politically sensitive and if I would have to auto-rate the questions I received on my energy tour, clearly the issue of climate change and COP21 and Nord Stream, and energy prices, have been the three questions I have received the most often. And I can say that this is irrespective of the audiences, be it national parliaments, stakeholders, or debates with citizens.

We will be preparing the response to the letter together with Commissioner Cañete, but we will seek the inputs also of other Commissioners and we will also seek the agreement of the college on this response, because it’s an official letter and we have to present an official position.

Let’s be clear. The Commission cannot stop this project. But it can require that EU law is applied, and especially to the onshore section of Nord Stream 2. I may be wrong, but you can correct me.

I would not go into the legal details right now, because I first would need to know the precise parameters of this project.  That’s why we initiated first contacts between senior Commission representatives and the German energy regulator, to clarify the parameters of the project and how we see the proper application of EU law. We really need to know all the details, but it’s quite clear that all relevant EU laws should be applied to the Nord Stream 2 project.

Isn’t it the perfect time, before you prepare your answer to the ministers, and before the legal services scrutinise the project, that the companies interested, some German, some Austrian, some Dutch, to lobby on you? I’m provocative, of course.

Of course, this is the issue always raised at different occasions. It’s raised by ministers when I’m in the Council, it’s raised by stakeholders when I’m at different conferences. But in this particular case, it’s quite clear that our legal position needs to be particularly precise, knowing the interests surrounding this project and knowing what scrutiny we are under. There is no doubt that that the positions we will adopt will be legally tested.

When I read the Bulgarian press, I often see the accusation of double standards. The Commission stopped South Stream, but the Commission doesn’t want to pick a fight against Nord Stream not to offend Germany, many people believe. I know that this is over-simplistic, but I have seen the text of the Intergovernmental agreement between Bulgaria and Russia on South Stream, and the many provisions in breach of EU law. But if in the same way as Western firms have agreed with Gazprom on Nord Stream, other firms make a clean agreement on South Stream, is it possible that this project sees the light of day?

It’s a hypothetical question, but I would refer back to the discussion we planned to have on 9 December 2014, when I invited the energy ministers from the South East European countries, to discuss how to deal with this project. At that time, the idea was to look for solutions compatible with EU law, because the situation was blocked from the moment when Russia didn’t want to continue the expert talks on how to apply the EU law for such big projects in Europe, and took the issue to the WTO. The idea of this meeting was how to brainstorm how to deal with this project.

But the debate was preceded by the fact that the same morning we received the announcement about the cancellation of South Stream [by Russia, who said it would build Turkish Stream instead].

So our debate was completely different, and later on we created the umbrella of CESEC [The Central and East South Europe Gas Connectivity high level group]. Here, what I want to say is that if the consortium decides to propose such a project, what I think is important is to avoid the mistakes of the past and be sure that from moment one there is full awareness of the importance of maintaining and respecting EU law.

But at the same time, I would like to say I was very encouraged by the progress achieved in the CESEC group and by the fact how even without super mega projects, we can guarantee energy security for the countries of Southeastern Europe and the Western Balkans, by better interconnectors, by diversifying the suppliers, by making sure that each of these countries get the possibility of importing gas from at least three different sources. And I think that we really progressed in record time, and agreed in a couple of weeks these 10 projects, the most important being very much covering Bulgarian concerns. I’m referring to the interconnector with Greece, which is being approved right now, with Serbia, the reinforcement of the Bulgarian gas system, the inclusion of a Bulgarian gas hub into the projects of common interest. Also I’m referring to the progress of the Southern Gas Corridor, the new development in the Eastern Mediterranean, where new gas discoveries have recently been made.

What would be very important here is to assess what would the best solutions would be to guarantee adequate supplies and energy security, and to some of those questions we will do our utmost to provide the answers, in our security of supply package in February of next year. We are going to propose revising the gas supply directive. We are going to present the new LNG strategy, because LNG is becoming the new global phenomenon and LNG prices are now very competitive, sometimes even lower to the price of gas we are getting through pipelines.

I think we need to go beyond the traditional vision on how to supply our countries from a few traditional sources, but how we can really extend the portfolio of potential suppliers to Europe.

Azerbaijan is a potential supplier outside Europe, but there have been tensions with the EU. Isn’t there a risk that Azerbaijan would sell all its gas to Turkey?

The Southern Gas Corridor is progressing according to schedule. It’s one of the most ambitious projects that is currently being built. Cclearly the ambition of Azerbaijan is to supply both Turkey and Europe. Contracts have already been signed.

We are progressing quite well. We are thinking about having another advisory council meeting early next year. We started with this advisory council approach last year, because it opens the opportunity to have the business side of the project talking to the political representatives of the countries through which the SGC is routed, and overcome the issues.

Some of the issues have been resolved, and I’m very much convinced that before 2020 we will have Caspian gas in Europe.