Proposed Nord Stream 2 compromise guarantees Ukraine’s gas transit role

Nord Stream pipe sections are delivered to the coating plant in Kotka, Finland. [Nord Stream2]

The European Commission hopes to bring together the friends and the foes of the Nord Stream 2 gas pipeline project around a mandate which would guarantee that Ukraine would remain a transit country for Russian gas to the EU.

EU countries are deeply divided concerning the Gazprom-favoured Nord Stream 2 project. Poland, the Baltic states and others, including Denmark, argue that Nord Stream 2 would increase the European Union’s dependence on Russia’s Gazprom, which already supplies about a third of the bloc’s gas.

Poland wants EU to ban Nord Stream 2

Poland wants the European Union to ban the construction of a second pipeline to pump Russian gas to Germany under the Baltic Sea, alleging it undermines the bloc’s strategic interests and violates competition rules.

Conversely, Germany where the pipe from Russia across the Baltic Sea ends, and countries with stakes in the project, say Nord Stream 2 means cheaper gas supplies for Europe. Gazprom’s European partners in the project project include Germany’s Uniper and BASF/Wintershall, Austria’s OMV, UK’s Shell and France’s Engie.

Putin and Gabriel team up on Nord Stream 2 against Brussels

Germany’s Minister of  Finance, Sigmar Gabriel (SPD), has aligned himself with Vladimir Putin on the Nord Stream gas-pipeline expansion issue. EURACTIV’s partner Tagesspiegel reports.

Under pressure from both sides, last week the Commission asked for a mandate from the member states to negotiate an agreement on Nord Stream 2 with Russia.

Commission passes the Nord Stream 2 buck to member states

The Commission asked the member states on Friday (9 June) for a mandate to negotiate with Russia an agreement on the Nord Stream 2 gas pipeline project. It is very likely to obtain permission, despite several Central European countries strongly oppose it.

Commission Vice-President in charge of the European Union Maroš Šefčovič met with journalists today (14 June) to inform them of the latest developments and answer questions.

He said he had discussed the issue both with Russia’s Minister of Energy Alexander Novak and with Ukraine’s Deputy Minister of Energy Natalia Boyko, with whom he met in the capital of Kazakhstan Astana on 11 June, where he visited the Future Energy-themed EXPO 2017 and delivered a speech at the Energy Ministerial meeting on “Meeting the Challenge of Sustainable Energy”.

Šefčovič explained that the draft mandate would be first presented to the member states at working and ambassadorial level, and would be then taken to the Energy Council in Luxembourg on 26 June. This would allow the Commission to have talks with Russia at the end of August or beginning of September, he said.

Asked how he saw the way forward, Šefčovič said that judging from past experience, “a couple of months” would be needed for discussions among EU members. He said that in initial reactions, Poland stated that the proposed mandate was too weak, while Germany raised questions as to the legal and political aspects of the mandate.

Nordic pressure

He said the Nordic countries were pressing the Commission for having this mandate, because they needed to issue various permits for the construction of the pipeline, and that they wanted to know in what public framework they are operating. Nord Stream 2 is passing through exclusive economic zones and territorial waters of Finland, Sweden and Denmark.

Šefčovič stated that he was confident at a compromise with Germany and Poland would be reached, and a mandate would be agreed. Then he said he was also confident that Russia would understand that it would be better to have legal clarity on the project.

He remarked that the completion of the pipeline would have an impact “on the whole architecture of the gas networks in Europe”.

‘Devastating effect’

“It has a potential to have negative effect on Central and Eastern European countries, and it could have a devastating effect on Ukraine”, the Commission Vice-President said.

This new route, coupled with the Turkish Stream project, is aimed at bringing Russian gas to the EU by bypassing Ukraine and robbing the former Soviet republic of transit tax revenues. Nord Stream 2 and Turkish Stream would also siphon off revenues from EU members Poland, Slovakia, the Czech Republic, Romania and Bulgaria.

“So it’s quite obvious we included in our mandate the importance of the measures which should be undertaken to mitigate, or completely eliminate, the negative impacts on Central and Eastern Europe,” he said. Šefčovič added that the Commission’s probe on Gazprom revealed that in 2014 and 2015 the Central and Eastern European countries were paying the Russian monopolist between 14 to 24% more for gas, compared to the countries of Western Europe.

The Commission Vice-President read from the draft mandate, where are mentioned “appropriate measures to ensure the possibility of mitigating the potential negative market impact of the Nord Stream 2 pipeline, in particular the need for sustainable long-term gas transit after 2019, along a number of existing supply routes, notably via Ukraine”, and also that member states should open up the gas markets according to the EU energy law. He added that there were still interconnectors in Central and Eastern Europe “blocked by Gazprom”.

According to information obtained by EURACTIV.com, one such interconnector is between Romania and Serbia.

Asked what made Nord Stream 2 different from Nord Stream, which was inaugurated in November 2011 in the presence of EU officials, Šefčovič explained that the first Russia-Germany pipeline was a considered project of European interest, when Europe wasn’t sure who was to blame for the 2009 gas crisis. The political and economic context is quite different now, he said.

Implications for Turkish Stream

The Commission Vice President mentioned that he had discussed with the Russian energy minister Gazprom-led projects in Europe’s South “for which the EU learned from the press” and which he didn’t name. But he said he received only “basic information”, and that Russia wanted to know what is the EU view.

Šefčovič said he would discuss the issue with the member states and come back with more information on the occasion of the meeting planned for the end of August or beginning of September.

Gazprom is already laying the pipes in the Black Sea for the first line of Turkish Stream pipeline, to the European territory of Turkey. A second line could be constructed to the Bulgarian shore, where the defunct project South Stream was planned to land.

Russian PM: Turkish Stream will enter EU via Bulgaria or Greece

Russia is in negotiations with Greece and Bulgaria regarding the entry point on EU territory of the Turkish Stream gas pipeline, Russian Prime Minister Dmitry Medvedev is quoted as saying by the Russian press.

Asked if the compromise on Nord Stream could become a precedent for a second line of Turkish Stream to the Bulgarian shore, Šefčovič said indeed, this could be the case.

The Commission Vice-President said he had spoken to the Bulgarian energy minister last Friday (9 June), but added that more details were needed.