A total of 13 out of 26 European Union (EU) nations have called for the EU to renegotiate the terms of the Nord Stream 2 pipeline deal, arguing that the project gives leverage to Russian geopolitical manoeuvrings, that it neglects Ukraine and that it increases European dependence on Russian gas to an unacceptable level. Nord Stream 2 comprises a new 1200 km twin pipeline running the same route as the first Nord Stream line, under the Baltic Sea from Russia to Germany. This additional line is set to add another 55 billion m3/y, which doubles current capacity when combined with the existing Nord Stream pipeline. At present, Russia supplies 34% of European gas; with the addition of Nord Stream 2 this figure will rise to approximately 40%. Gazprom is the sole shareholder of the new extension and the consortium consists of a handful of European energy companies (ENGIE, OMV, Royal Dutch Shell, Uniper and Wintershall).
Register for a free trial »
Get started absolutely FREE in 2 minutes, no credit card required.
There are calls from the 13 states for the deal to be renegotiated within the context of the Energy Union: a strategy, set in place in 2014, to build European infrastructure in the interests of diversity and security of supply for Europe. The Energy Union envisages a fully integrated internal energy market, with free flow of energy throughout the EU. Nord Stream 2 is under fire because it doubles access to market for Russian gas, and because Ukraine will lose out on transit revenue if Russian gas no longer needs to traverse the country. The project is criticised for diverting trade and transit revenues away from member states, and for making Ukraine more dependent on EU subsidies.
Germany, the landing point for both the existing Nord Stream pipeline and the expansion line, remains strong in its support for the project. Calls for it to be renegotiated away from German control suggest that Germany’s absolute confidence in the economic justification of the project is not shared by all.
Selected EU states are not alone in their disapproval of the project. The US has been overtly critical – most recently showcased by the inclusion of the project in new sanctions drawn up against Russia. President Trump finds himself at odds with his own party, as the Republican-majority controlled Senate has moved to pass a bill amendment that imposes sanctions on Russia to combat ‘terrorism and illicit financing’. The amendment states that the US is opposed to Nord Stream 2 on the grounds of its potential detrimental impact to European energy security, to gas market development in central and eastern Europe, and to energy reform in Ukraine. If signed into law, it would provide the government with the authority to penalise companies involved in the Gazprom deal. President Trump would have to impose sanctions on foreign companies that invest in Russian oil and gas projects, such as shale and Arctic drilling. The new amendment is designed to discourage companies from involvement in Russian energy ventures, thereby diminishing competition for other energy sources, which of course includes US shale and LNG projects. Washington will not forgive Russia for – among other aggressions – meddling in the recent US presidential election. Trump’s preference for a rekindling of relations between the US and Russia is not going to be easy to bring about.
Which brings me to the recent G20 summit, at which Trump and Russian President Putin met for 2 hrs and 16 min., much longer than scheduled. Official reports state that they discussed sanctions, but Trump denied doing so. Trump spent the conference focusing on domestic concerns and gravitated towards non-democratic states, rather than courting European nations. Before the G20, Trump visited one EU country, Poland, which has also been a fierce opponent of Nord Stream 2.
Speaking after G20, Isabelle Kocher, Chief Executive of Engie, said she hopes that EU leaders had used the forum to demand that the US abandons its sanctions against the pipeline project. Klaus Schafer, Chief Executive of Uniper, said: “The proposed sanctions not only affect Russia, but also Europe and Germany […] I appeal to all parties involved […] to leave the problem of Europe’s energy supply to Europeans.” If only it were that simple.