Teletypes have brought the news: 13 out of 28 EU member states made a stand against construction of the Nord Stream 2. It seems that we may witness grave confrontation towards implementation of the idea of Nord Stream 2, which was put forward by Russian gas monopolist – Gazprom.
Note: Nord Stream 2 is a project of cross-country gas pipeline from Russia to Germany across the Baltic Sea. The start of the construction was scheduled for the latter half of 2018,entering into service – for the end of 2019. The new gas pipeline will basically follow the route of the first, redoubling its capacity (from 55 to 110 billion cubic meters a year). Estimated capital investments are 8 billion Euro, the total value of the project is 9.9 billion Euro.
Gazprom partners are major European energy providers. Poland, Estonia, Latvia, Lithuania, Slovakia, Czech Republic, Hungary, Romania as well as Ukraine oppugn the project considering it a treat to political and energetic self-sufficiency of the EU and security of some of its member states.
With a view of ecological safety of this project, Sweden, Finland and Denmark took the gas pipeline under the Baltic Sea cautiously.
Chief body of legislative power – the European Parliament – opposes construction of the gas pipeline. The European Commission is also going to impede its implementation. Debating point is also implementation of such a scale infrastructure project with the participation of Russia as far as it is subjected to sanctions.
In order to bring to life the Nord Stream 2 project, Russia has employed a proven technique – engagement of private European companies into implementation of the project, which consider cooperation with Gazprom a bonanza.
The new gas pipeline would be constructed by Gazprom’s affiliated (100%) company – NordStream 2 AG. It executed financing contract for the project in April. The project involves five major European oil and gas holdings: Shell (Britain and Holland), Engie (France), OMV (Austria), Uniper and BASF/Wintershall (Germany). They will grant NordStream 2 AG credits for 4.75 billion Euro at an annual interest rate of 6%. Therefore, whether the new gas pipeline would be constructed or not, European companies will come into money. Thus, engaging trans-European holdings in projects which represent no risk for whoever except for Gazprom, Russian monopoly makes attempts to persuade everyone that Nord Stream 2 is exceptionally commercial, private project which has no political implications and claims no attention of EU bureaucracy circles.
However, the reality shows that two lines of Nord Stream 2 enter German spot market refilling it with 55 billion cubic meters of gas due to new capacities. This will make Germany more convincing player at the European energetic market and strengthen its political influence. Therefore, Berlin, under Gazprom’s (actually Kremlin’s) estimates, shall become (and have already become) chief project lobbyist. Austria also upholds Germany frankly and actively in this issue. Those states which deprecate project are Poland, Slovakia, Baltic States, Romania and Ukraine. As head of Polish government Beata Szydlo declared, “Nord stream 2 is a political project and Poland stresses on it determinately in the course of negotiations within the EU.”
Indeed, it’s difficultly to assess Nord Stream 2 exceptionally as economic project. Estimated capacities of the two new gas lines across the Baltic Sea are 55 billion cubic meters while existing capacities for gas supply from Russia to Europe (approximately 255 billion cubic meters a year) exceeds peak Gazprom’s export following the last year results by 75 billion cubic meters (in 2016, Russian monopolist supplied 179.3 billion cubic meters of gas to Europe). It turns out that instead of existing capacities those of the Nord Stream 2 would be exploited. One should not be as wise as Solomon to realize the idea of Gazprom’s initiative – implementation of the project will minimize the share of the Eastern European states, and specifically Ukraine, in transportation of Russian gas. That was expressly declared this April by Gazprom head Aleksey Miller – “We may predict far less transit volumes after putting Nord Stream 2 in operation, possibly, approximately 15 billion cubic meters a year for the states bordering with Ukraine.”
Note: Ukrainian gas transport system has high traffic capacity, reliability and flexibility. Traditional route is also the most cost-effective for transportation of Russian gas to the Central, Eastern and Southern Europe. Among all the existing options that is the only route for Russian gas supply which is completely separated from Russian monopoly supplier. As opposed to Gazprom, Ukrainian provider (Ukrtransgaz) works transparently disclosing its data online on transparency platform ENTSO-G and cooperates with the European Commission. The purpose for adoption of European gas legislation (“third energy package”) is limitation of gas suppliers’ (providers’) influence, particularly Gazprom’s. Gas transportation through the sea (offshore) gas pipeline (that is Nord Stream 1 and Nord Stream 2 construction project) officially do not fall under the scope of these laws which interfere with freedom of energy product trade.
The second purpose pursued by Gazprom (i.e. Kremlin) is preventing self-sufficiency of the Eastern European states as a result of construction of terminals for liquefied gas intake. If the second gas pipeline after all is constructed, twice as much of Russian gas will flow to the European market making expensive terminals for liquefied gas intake and gas pipeline through the Caspian Sea non-demanded. Thus, Gazprom will strengthen its monopolistic positions on the European market which contradict the world trend of maximal liberalisation and globalization of gas market due to cheap liquefied gas from Qatar and shale revolution in the USA. It is anticipated that until 2020 Americans would produce 100 bln cubic meters of natural gas more than they need with following exportation of it to Europe as liquefied gas.
Here the third and probably the main Gazprom’s (i.e. Kremlin’s) purpose is clearly perceptible – splitting the EU apart and delivering a blow over its partnership with the USA. Promoting the Nord Stream 2 project complies seamlessly with integral foreign policy strategy of Russia focused on opposition of the formerly allied states one to another. Suppressed by migration crisis, Brexit and the extension of influence of right populists, Europe will arrive at a new internal crisis, while US and European relations will acquire entirely new negative features.
Russia, a treacherous infringer of existing world order, still occupies Crimea moulding it into powerful military base with nuclear weapons, destabilizes situation in Ukraine, threatens the states of NATO Eastern flank, breaches the Treaty on the Elimination of Intermediate-Range and Shorter-Range Missiles, supports Asad’s bloody regime in Syria, inducing the migration wave in Europe, holds cynical subversive informational war throughout all the directions and… “slaps hands” joyfully. Even if the Nord Stream 2 is not accomplished, it has played its role. Kremlin’s lobbyism of the project has led to a conflict of the USA with leading EU states and to substantial tensions within the EU itself.
Protagonists of Nord Stream 2 gas pipeline construction among European political elites by all means should develop an understanding that the times to keep a foot in both worlds have passed. That is impossible to support sanctions against Russia together with constructing Russian cross-country gas pipeline which makes Europe even more (rather than less) dependent from Kremlin. Disposing of doubtful relations and derogatory energy dependence from rogue state will only benefit Europe.