Nord Stream 2: Pay your money, take your choice
The pipeline faces a tough financing climate and continued opposition
Nord Stream 2 project is either the answer to Europe's prayers or one huge nightmare, depending on who you're talking to. Polish lawyers are trying to block it, while Gazprom is hell-bent on getting the strategic pipeline project built, despite the impact of US sanctions.
The two-string pipeline project would take Russian gas across the Baltic Sea floor and inject it into Germany and its neighbours. It would add 55bn cubic metres a year of much-needed and relatively cheap gas to a region faced with declining North Sea production.
A consortium of industry heavy hitters clubbed together to back the pipeline, with
Shell, Austria's OMV, France's Engie and Germany's Uniper and Wintershall each pledging to provide €950m ($1.1bn) of the project's estimated €9bn cost, some of which has already been spent. If the wheels run smoothly, first gas could be running through the pipeline towards the end of 2019.
However, Poland and some its neighbours, trying to shake off their reliance on Russian energy supply
—and, in some cases, protect their own domestic energy production — continue to argue that Nord Stream 2 works against the European Union's aim of creating a more integrated and harmonised energy network. German leader Angela Merkel is also believed to be less than enthusiastic about the pipeline strategic merits. Nevertheless, she has been convinced of the economic benefits at home. Monopoly fears
The lobbying of Poland and its allies contributed to a push by the
European Commission —the EU's central administration—to establish an EU-Russia agreement to cover supply passing through the non-Russian section of the pipeline across the Baltic. This would effectively prevent Gazprom having a monopoly over what passes through it. The EC argues that the pipeline could be used by Gazprom to create a near supply monopoly and could kill off one alternative pipeline route —that through Ukraine.
However, a 27 September report on the EC's request by the EU Council's legal service—leaked by the
Politico website —suggests there may be no legal basis for the EC to become involved in drawing up a legal framework for the sub-Baltic stretch of the pipeline. The report also says that, in any case, Germany, as the recipient of the gas, may have a right to veto any political mandate, given that the EU was not permitted to block a member state's choice of energy supplier.
Whatever the legal ins and outs of the EC's position, Nord Stream 2 developers also have to cope with the impact of the US government's beefed up sanctions. These were initially put in place after Russia's annexation of Crimea. The US threatens to penalise financial institutions doing business with the US if they fund a swathe of Russian energy projects.
The effect on the project is already tangible. OMV's chief executive Rainer Seele said in September that his company's funding for Nord Stream 2 would probably need to be reviewed in light of the US sanctions, which had made the financing of such projects in international markets "almost impossible". He was quoted by
Interfax as saying that the partners would need to rely on their own capital to fund the project. Staying upbeat
Gazprom has responded to this gloom with an upbeat assessment of the project's chances of being fully funded. The company's chairman, Viktor Zubkov, indicated in late September that the company would rely on its own resources and may turn to lenders in the Asia-Pacific region, if European institutions refused to invest.
—perhaps unsurprisingly —is an analysis of the economic effects of Nord Stream 2, (commissioned by the Nord Steam 2 company itself). The report, written by management consultancy Arthur D Little and published in October, concluded that, as of July 2017, total economic benefit for the EU, where 59% of total investment is going, would be over €5.15bn, with the equivalent of around 31,000 full-time jobs created over a five-year period and the addition of €2.26bn to GDP. Most benefits would be felt in Russia, Germany, Finland and Sweden, the report said.
comments powered by Disqus.