‘Making whole’ Nord Steam-2’s opponents

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV Media network.

A sign reading "Nord Stream 2 - Committed. Reliable. Safe." is picutured near the pipeline landfall facility after a visit of Mecklenburg-Western Pomerania. [Clemens Bilan/EPA/EFE]

Poland and Ukraine have long opposed the Nord Stream 2 gas pipeline, and both claim that their financial and political losses should be compensated. But in fact, they were already ‘made whole’, Danila Bochkarev writes.

Danila Bochkarev is associate researcher at the Institute of Political Science Louvain-Europe. The views expressed here are solely those of the author and do not represent views of his organization.

The pipeline is already the subject of negotiations between Germany and the United States. The project was discussed at the recent meeting between Chancellor Merkel and Secretary Blinken in Berlin and will be debated during the Biden-Merkel talks at White House on 15 July.  Earlier, in a hearing at the US House of Representatives, Secretary Blinken confirmed than the US is “actively engaged with [Berlin] to …make sure that the transit fees that Ukraine at some point in the future may lose as a result of this pipeline…[is] made whole”. The parties have not furnished specific details but a potential aid package could include German investment in Ukraine’s renewable or hydrogen industry. Berlin also insisted Ukraine must remain a transit country.

The Ukrainian side also presented quite maximalist demands, a common practice in the negotiation process when the parties correct their initial positions in order to find a compromise. Ukraine’s Minister of Foreign Affairs stressed that the condition for the pipeline launch should be “deoccupation of our territories”. Newly appointed Naftogaz CEO Vitrenko de facto demands to extend the EU law to Russia’s territory.  The negotiation is likely to be lengthy and we should not expect any breakthrough before the Biden-Merkel and Biden-Zelenskiy meetings but the chances to reach an agreement are significant. Just a note: the Ukrainian side should not forget that “making Ukraine whole again” does not necessarily equal “making Naftogaz whole again” and the assistance package might come in form of development aid not in form of a compensatory payment. Nonetheless, Ukraine’s interests are now front and centre in the discussion between Berlin and Washington.

Poland, on the other hand, has also redoubled the efforts to delay the launch of Nord Stream-2 once it became clear that Washington is not going to further sanction European companies engaged in the project. Prime Minister Morawiecki was critical of the Biden administration’s 180-degree turn on the pipeline, and the Polish government claimed Nord Stream 2 is a threat to energy security. In April a group of Polish MEPs attempted to force a plenary vote on the pipeline and in June, the Polish Sejm adopted a resolution calling on EU and NATO to stop construction of Nord Stream-2.

Polish politicians have consistently cited the pipeline as an example of German-Russian collusion over the interests of the central and eastern European states. Furthermore, Poland’s national security strategy asserts that blocking the creation of gas transmission infrastructure from Russia to Europe is its energy security goal.

Nevertheless, it is actually unclear how the project could negatively affect Poland’s energy market or its energy security. Several impact analyses showed that Nord Stream-2 will have positive effects on the European gas market. A study by Frontier Economics/Institute of Energy Economics stressed that gas prices in Europe in the case of Nord Stream 2 is 0.77 EUR/MWh lower than in the case without. This could benefit Polish consumers should Warsaw reverse it gas storage regulation which partly shielded Polish gas market from competition.

A study by the Oxford Institute of Energy Studies also mentioned that new Russian gas arriving to Germany might be the best option to offset any possible shortfall of supply from the alternative sources. It is worth noting that Poland is already independent of physical gas imports from Russia. Its entire import demand could be supplied by LNG (5 bcma) and via reverse-flow pipelines from Germany (9 bcma). Additionally, the launch of the Nord Stream – 2 would not necessarily reduce the Russian gas flows via Poland. The transportation of gas via the “Polish route” is governed by the EU capacity allocation mechanisms and Polish TSO will just have to compete with other routes – including Ukraine – by offering attractive conditions.

The fixation on “ideological physicality” in gas supplies (a term used by Professor Jonathan Stern) was behind Warsaw’s quest for the new supply routes such as the Baltic Pipe and the expansion of Świnoujście LNG terminal. By 2022, this new infrastructure will add 12.5 bcma of import capacity which should make the issue of dependence on Russia totally irrelevant.

Warsaw’s quest for “ideological physicality” is co-financed by European taxpayers. Import pipeline and LNG infrastructure (Świnoujście LNG terminal and the Baltic Pipe) were supported by the EU grants worth 669 million euro.  Furthermore, Poland is the largest net receiver of the European financial assistance. In 2014-2020, the country received over €86 billion from Brussels. Network infrastructures in transport and energy were allocated €23.6 billion, low-carbon economy – almost €10 billion, environment protection & resource efficiency – €8.25 billion, and climate change adaptation – €1.23 billion. Therefore, in a sense, Poland has been “made whole” several times over, long before Nord Stream 2 comes into operation.

At this point, it purely comes down to politics. According to Warsaw, Nord Stream-2 breaks European solidarity. But conveniently, this argument is often made to deflect Europe’s demands of Poland in other areas, like migration, the rule of law and energy transition.

As long as Germany and other Western European states push through with Nord Stream 2, Polish politicians feel no need to account for the broader European policies or their neighbour’s concerns. This strategy is, however, a double-edged sword especially in Poland’s relations with Germany. Warsaw has included nuclear energy together with offshore wind as key strategic projects that will help the country decarbonise its power system. Backing financial and political support for Polish nuclear might be difficult for the German government, which already took a firm commitment to phase-out nuclear energy by 2022. This support will be tough if not impossible in case the Green party joins the next coalition government. In this context, Poland might come under increased pressure to review the timing of its coal phase-out.

Nord Stream 2 is in the last stages of finalisation. This realisation has guided the shift in policy in Washington and opened the door to political discussion aimed at improving energy security for Ukraine. Secretary Blinken also recognised that the project’s “physical completion… (is) a fait accompli”. It stands to reason that Poland should take page from Washington’s book and bury the hatchet as well.

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