Russia’s Gazprom lucks out as Germany rejects revisions to the EU’s energy directive

Russia’s Gazprom lucks out as Germany rejects revisions to the EU’s energy directive
German rejects amendments to the EU's energy directive that could be used to block Nord Stream 2 pipeline / wiki
By Ben Aris in Berlin January 29, 2019

Russia’s Gazprom lucked out as Germany once again rejected mooted revisions to the EU’s energy directive, the Gas Directive (2009/73/EC), it was reported on January 29.

In November 2017, the European Commission suggested amendments to EU gas legislation. They extended the requirements of the Third Energy Package, which assumes separating the gas supply and gas transportation functions, to all gas pipelines entering EU territory, Vedomosti reported. According to the paper, some exceptions might be made for specific pipelines if they do not hurt competition or the security of supply

Germany has rejected proposed amendments to the document, while the Netherlands and Finland have objected to a clause that gives the European Commission the right to control interstate agreements on gas transportation, formulate the main requirements for negotiations and block them.

The Netherlands has also stated that, as well as not applying to gas pipelines that have already been built, the updated Gas Directive should not cover pipelines under construction.

Several EU members are keen to block the 1,200km Nord Stream 2 pipeline that will carry Russian gas under the Baltic Sea to Germany, allowing Russia to stop using Ukraine as a transit route. About a quarter of the pipe is already built and is due to come online at the start of 2020, just as Russia’s transit deal with Ukraine expires.

Specifically, the language of the proposals refers to the territory of the EU — a problem since the EU legally has no sovereign territory of its own — but more an issue because of the permanent tension between a pure "rule of law" approach to regulations vs. a more geopolitical one.

Arguments that regulatory requirements for infrastructure linking to EU member states by way of third-party states should be tightened have a problem: Azerbaijan's Socar has not been held to the standards many hope to apply to Gazprom. It's assumed Germany will keep protecting the project.

“We have always stated that the Nord-Stream 2 project is subject to certain risks, including political. We see the current newsflow as supportive for sentiment on Gazprom’s shares. Nevertheless, we think that different developments on the subject will continue,” VTB Capital (VTBC) said in a note.