European Council head calls for strict control of Nord Stream 2

By bne IntelliNews June 6, 2017

President of the European Council Donald Tusk waded into the row over Nord Stream 2 on June 6, urging the European Commission to exercise strict regulation of the Russian project on which he has a “negative view”.

Nord Stream 2 would double the 63bn cubic metre capacity of the current Nord Stream route, which carries Russian gas directly to Germany. The European Commission is currently talking with Central & Eastern European countries over its bid to negotiate collectively for the EU.

States such as Poland complain the project would increase dependence on Russian gas, and also hang Ukraine out to dry. Moscow says it plans to cut gas transit through Ukraine completely. However, with Germany behind the project, it appears to be making its way steadily towards reality.

Still, there is signficant opposition around Brussels. Former Polish prime minister Tusk said in a letter to European Commission President Jean-Claude Juncker that Nord Stream will “not serve the best European interest” and would leave Ukraine “at Russia’s mercy”, The Financial Times reports. The European Council head called for strict regulation of the Baltic Sea project.

“It also contradicts the objective we have set for the energy union," Tusk continued. "It will make us more dependent on Russian supplies and it will concentrate gas transit along the existing route. Also, it will strengthen Gazprom’s position as the EU’s dominant gas supplier. In short, it will not serve the best European interest,” he added.

In order to ensure Nord Stream 2 is not harmful to the EU and Ukraine, Tusk urges Juncker to negotiate an agreement with Russia on the rules for the pipeline that are in line with the EU regulations as well as protect political interests of the bloc. Whether the pipeline is covered by the EU's third energy package, which demands open access for gas suppliers of all infrastructure, is as yet unclear.

Brussels has for years limited supplies arriving from Nord Stream 1 by capping the use of the Opal pipeline which brings the gas onshore. However, a deal agreed late last year offered Gazprom more leeway on using the link.

Kyiv stands to lose billions in transit fees should Russian gas exports to Europe be re-routed. That would most certainly contribute to internal turmoil in a country already battling Russian aggression, divided between pro-Russian and pro-EU sympathies, and struggling to contain rampant corruption.

Tusk’s letter surfaces at a time when Brussels seeks to adjust its stance in dealing with Russia. Under pressure to avoid a massive competition probe by the EU, Gazprom has offered to allow cross-border trading between importers, thanks to which member states in CEE will have greater leverage in negotiating Russian gas supply deals. However, the likes of Poland complain that the deal does not insist on punishing Gazprom for years of abusive pricing and conditions.

Meanwhile, Gazprom is pushing forward with financial engineering for Nord Stream 2. The company said on April 24 that it closed a €4.75bn financing deal for the construction of Nord Stream 2 with five major European companies, two of them German.

 

 

 

 

 

 

 

 

 

 

 

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