Russia's Nord Stream gas pipeline faces summer of hate

By bne IntelliNews May 29, 2008

Bogdan Turek in Warsaw -

July could see a dramatic reversal in the European Commission's support for the controversial Russian-German gas pipeline that will run under the Baltic Sea, after a series of small protests by the Baltic states against the construction of the Nord Stream pipeline gained the support of a European Parliament committee.

A report opposing the project presented by Polish Deputy Marcin Libicki, chairman of the 43-member Petitions Committee on May 27, produced a surprising voting tally. The report, which described such a gas pipeline as harmful for the environment, was adopted on a 26-3 vote with one abstention. The committee plays the role of sounding board in the EU. It monitors petitions sent by EU citizens on various European issues. Libicki said he received a petition in 2007 signed by 30,000 Baltic citizens against construction of the pipeline.

Polish Minister of Infrastructure Cezary Grabarczyk, in an exclusive interview with bne, said that the future of the Nord Stream Project now rests with the European Parliament and the European Commission. "I hope that the European Commission will speak against the construction of the pipeline because it constitutes a real danger for the environment of the Baltic Sea," said Grabarczyk.

The report presented by Libicki was, unsurprisingly, attacked by German deputies who proposed 189 amendments to soften it, but most of them were rejected. Germany's BASF and E.On hold 20% each in the Gazprom-led consortium building the pipeline (Dutch Gasunie has 9%), while the chairman of the shareholders' committee is Gerhard Schröder, who negotiated the pipeline with Russia while he was serving as German chancellor. The German-Poland agreement to build the pipeline prompted Radek Sikorski, who is now Poland's foreign minister, to compare the deal to the hated Molotov-Ribbentrop pact between Russia and Germany before World War II.

The Petitions Committee's report faces its next crucial test before the European Parliament, which will vote on the issue in July. If the report is approved, the European Commission will have to alter its hitherto support for Nord Stream. Parliamentary approval won't have any binding legal consequences for Nord Stream, but an endorsement of the report would intensify political pressure on Moscow by opponents. "I am counting on a positive vote in July," Libicki said.

Critical costs

The report adopted by the Petitions Commission focuses on two costs of the pipeline: the environmental costs and the monetary costs:

"The world's longest and shallowest dual sub-sea gas pipeline would be especially vulnerable to potential damage," the report claims. "Dozens of months of work in an area of up to 2,400 square kilomotres, requiring the use of a large number of vessels and other equipment, represents a serious threat to biodiversity and to a number of habitats."

It added that munitions dumped on the Baltic seabed after World War II could pose a threat to the Baltic marine environment, and to human life and health, if disturbed. Toxic substances such as mustard gas, sulphur yperite and nitrogen yperite, are all present among about 80,000 tonnes of munitions whose casings are now very heavily corroded and cannot always be located.

Polish Environment Minister Maciej Nowicki told bne that earlier international protests by the Baltic states had persuaded the Nord Stream consortium to move the route of the planned pipeline closer to the Swedish coastline. According to Nowicki, that decision poses new problems because Sweden has very tough environmental standards. "A lot will depend on what the Swedes will do now," said Nowicki. "Knowing them, they will not take it easily."

The problem of financing the growing costs of the project also hasn't been resolved either, because the banks are awaiting word on the final route of the pipeline. Initially, in 2005, the cost of the planned 1,200-km long pipeline was €4.5bn; now it's estimated at €7.5bn. That compares with the €1.5bn cost of building a pipeline over land transiting Poland, the co-called Amber project, which has been dismissed by Moscow because it wants to sideline Poland and other so-called transit states like Ukraine and the Baltic states by piping gas directly from Russia into Western Europe, thus removing one of the few pieces of leverage these countries still hold over Moscow.

The final cost will be determined only when the course of the route will be finalized by Sweden, Finland, Denmark and Germany, which have to issue the permits, and four other countries, Estonia, Poland, Lithuania and Latvia. As yet, no single permit has been issued, said Sten Jerdenius, an expert in the Swedish Environment Ministry in charge of energy.

If completed, the pipeline would deliver 55bn cubic meters of gas a year (cm/y) beginning in 2012 to Europe, though that amount is not enough to meet rising demand for gas in the 27-member EU bloc of nations. According to the International Energy Agency in Paris, one quarter of energy needs in Europe are covered by Gazprom, but demand for gas is expected to increase by 200bn cm/y to 536bn by 2015.

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Russia's Nord Stream gas pipeline faces summer of hate

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