What is the future of Nord Stream 2? Will it really happen?

Norbert Röttgen, chairman of the foreign affairs committee of the German Bundestag just wrote: Germany in particular must urgently reconsider the controversial Nord Stream 2 gas pipeline project. Do you see Nord Stream 2 as a done deal, or do you think it still might not happen, and why? Read few comments.

Pipelay vessel Pioneering Spirit near Denmark’s Great Belt Bridge on its journey to join the Nord Stream 2 construction fleet in the Baltic Sea. The vessel is operated by contractor Allseas. Credit: https://www.nord-stream2.com/

Agnia Grigas, Energy & Political Risk Expert, Nonresident Senior Fellow, Atlacntic Council, Author of The New Geopolitics of Natural Gas

Nord Stream 2 is not a done deal, even though that’s how Gazprom’ public relations presents it. US Sanctions on the project a real possibility and there is bipartisan appetite to do what it takes to stop the project. A negative EU decision on the pipeline cannot be ruled out. In Germany, political support for the pipeline is weakening with Greens and Conservatives increasingly speaking out against it. Denmark has not approved the route of the pipeline through its waters and their Foreign Minister had just spoken out against the pipeline.

The only certainty on Nord Stream 2 is that Gazprom, the Kremlin, and Russian pipeline construction companies would really like to push this through before competition from new gas suppliers and LNG intensifies in Europe.

Madalina Sisu Vicari, Managing Director, Vocal Europe

Since the Kerch Strait incident, the voices that call for tougher stances on Nord Stream 2 have been multiplied in Germany, and Norbert Rottgen is one of them. However, as he highlights, given that the construction permits have been already granted with the exception of Denmark (though application for an alternative route, which does not pass through Denmark’s territorial waters, has already been submitted to Danish authorities) it is very difficult to stop the project at this stage. Nevertheless, “regulating” the gas supplied via the pipeline (Merkel) or even reducing its amount (Kramp-Karrenbauer) seem to be the solutions that German politicians contemplate for Nord Stream 2. Consequently, it would not be surprising if Germany would change its position on Gas Directive- which aims to apply internal energy market rules to offshore pipeline to third countries, and which is currently stalled in the Council, where nearly one third of Member States are against it-and speeding up the adoption of a negotiated position, which might be closer to version already adopted by the European Parliament. Though regulation of the pipeline through Gas Directive amendments is not seen favourably by Gazprom, the German political establishment needs to alleviate the pressure and criticism (and eventually the possibility of US sanctions) upon its support of the project. Hence, not opposing the Gas Directive, along with pushing for guaranteeing relevant gas volumes for Ukrainian transit post 2019, seem to be a feasible way to do that.

Katja Yafimava, Senior Research Fellow, Oxford Institute for Energy Studies, Oxford University

I think that in all likelihood Nord Stream 2 will be built. Some delay, in particular due to a yet missing Denmark permit, might occur and while the pipeline might not be available at full operational capacity of 55 bcma by the end of 2019 as planned by its promoters, the project will not be cancelled. What could happen is that the EC could attempt to limit utilisation of Nord Stream 2  once it is built, should the EC succeed in getting the Third Gas Directive amended (so that it would apply to the EU end of NS 2) –  the initiative it launched in 2017. So far, the EC has failed to get sufficient support in the Council for such amendment and it is not clear whether it will succeed in 2019. Even if the EC were to succeed  in amending the Directive, it is deeply questionable whether it would be able to cap NS 2 utilisation because any attempt to apply the amended directive to the project that has been initiated well before the EC has made its proposal to amend the directive would be contrary to the principle of legal certainty, this potentially resulting in litigation. Furthermore, any attempt to limit utilisations of NS 2 would have a negative impact on utilization of EUGAL pipelines, most of capacity in which has already been allocated under legally binding contracts (apart from short term reservation quota), thus also potentially resulting in litigation.

Agata Loskot-StrachotaEnergy Policy Research Fellow, Centre for Eastern Studies 

Nord Stream 2 construction has already started, over 300 km have been built in German and Finnish Baltic Sea waters and according to OMV by the beginning of 2019 about 70% of projects’s cost will be paid. That means the work on Nord Stream 2 is advanced and it is getting more and more difficult to stop the construction. At the same time there are still some questions regarding Nord Stream 2, its construction and the way it is going to function if/once completed.

First of all there is still no Danish consent to Nord Stream 2 construction via its waters and quite recently  Foreign Minister of Denmark raised publicly security concerns regarding Nord Stream 2. We know of course that even if Denmark does not agree to the primary proposed routre of NS2 alternatives exist which cannot be blocked by Kopenhagen and Nord Stream 2 AG had even applied to Denmark seeking consent for such an alternative route. At the same time Denmark hesitation prolongs the process of gas pipeline construction, change of the route would prolong it even more. What is more – possible Danish refusal to agree to NS2 construction via its territorial sea due to national security concerns would constitute  a powerful signal to EU, Germany and all parties involved showing how controversial issue Nord Stream 2 is, and worrying not only in CEE but also Scandinavia.

Secondly US keeps on repeating that it may impose sanctions on companies involved in Nord Stream 2 financing. And even though it does not seem very probable, we cannot exclude this option (especially having in mind some unpredicted moves bu current US administration). If sanctions are imposed, than finalizing NS2 financing by 5 EU companies may be endangered, which again may result in prolongation of project’s construction.

Third thing is that we are still not sure what will be the legal regime in which Nord  Stream 2 will operate. We know though that there is a big dispute within the EU on that issue, and that the works on proposed by EC  amendments to GAs Directive have been de facto suspended on EU Council level during Austrian presidency. In January Romania takes over the presidency so there is a chance that this issue will move forward, and even if there’s not much time left we cannot exclude some changes here. In any case the issue of legal framework for Nord Stream 2 functioning must be clarified and that still is far from being done.

Paralelly to that we indeed observe an intensified debate on Nord Stream 2 not only in US and EU but also in Germany. The project had become a topic of publications in almost all media, and is being discussed among German politicians, which have differing opinions on it. Up till today we have not seen though any sign that German governement’s policy on Nord Stream 2 could change, which was confirmed recently by Peter Altmaier, German Minister for Economic Affairs and Energy. Yet the critical voices on Nord Stream 2 not only from German Greens but also CDU politicians show there is an ongoing intense debate on the project. Without any tangible successes (until today) of Berlin regarding guarantees of transit via Ukraine plus recent statements by both Angela Merkel and the new CDU leader Kramp-Karrenbauer that volume of gas flowing via Nord Stream 2 could be regulated / decreased one may think some developments here are also possible.

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