Page 6 - FSUOGM Week 34 2021

FSUOGM COMMENTARY FSUOGM

Merkel trying to cut near impossible

gas transit deal for Ukraine

With only a month left in office, Merkel is trying to cut an energy deal that will allow Germany

to receive gas from Nord Stream 2 but keep some gas flowing through Ukraine

UKRAINE WITH only a month left in office German Chan- Moscow visit.
cellor Angela Merkel is trying to cut an energy Germany’s backing of the pipeline is based
deal that will allow Germany to receive gas from on two grounds: bypassing Ukraine actually
Russia’s new Nord Stream 2 gas pipeline but keep improves its energy security as the Russian gas,
some gas flowing through Ukraine’s Druzhba which accounts for about a third of its energy
gas pipeline system. needs, will not transit a war zone where the two
But the deal remains elusive. The cash- contesting countries are also extremely litigious;
strapped Ukrainian government is concerned and by cutting out the middle man, Nord Stream
that it will lose out on the $2bn of transit fees 2 gas is much cheaper than that arriving via
it currently earns from the gas transit business, Ukraine, not to mention cheaper still than the
which have already fallen from the $3bn a year it even more expensive US LNG.
used to earn until Russia’s TurkStream pipeline However, aware that Germany has to an
came online at the end of last year – the southern extent betrayed Ukraine, Merkel is seeking some
sister pipeline line to Nord Stream 2, as Russia is sort of compromise for when the current tran-
building pipelines that will entirely cut Ukraine sit deal between Russia and Ukraine expires in
out of the transit business. 2024. Gazprom signed off on a new transit deal at
Nord Stream 2 was due to come online the last minute in December 2019 that commits
this week, as there are only 15 km left to build, the Russian gas giant to send 40bn cubic metres
according to Russian President Vladimir Putin; via Ukraine’s Druzhba pipeline until 2024. There
however, Gazprom said in statement that is an option to extend that deal for another ten
the work will now be finished at the start of years after it expires.
September. Ukrainian President Volodymyr Zelenskiy
The US has also objected to the Russian pipe- told Merkel during her visit to Kyiv on August 22
line that Washington claims will “undermine he is hoping Germany can give him "guarantees"
European energy security.” However, the Biden of a continuation of the transit deal after 2024
administration dropped its efforts to block con- and "Russia will pledge a minimum amount of
struction in June and struck a deal with Germany gas to be passed through Ukraine's pipelines,"
in July to allow it to be completed, admitting that despite the completion of Nord Stream 2.
the pipeline was a fait accompli. The US had been Russia has been sending just under 200 bcm
hoping to kill Nord Stream 2 off in order to boost of gas to Europe a year via a combination of
its own exports of the much more expensive pipelines that include Nord Stream 1, Ukraine’s
LNG to Europe, where it is already the biggest Druzhba system, the southern route of Turk-
exporter to the bloc. Stream that came online last year and pipelines
But Merkel has insisted the project will be to that traverse Belarus. The combined capacity of
the benefit of all countries in Europe, not just Nord Stream 1 & 2 will be approximately 110
Germany. She also hinted that as it will be cov- bcm, which is currently just enough to cater to
ered by EU rules there may be demands put on all the demand for gas travelling by the northern
the pipeline thanks to EU energy laws, such as route.
forcing Russia to give access to the pipeline to Merkel met with President Putin two days
companies other than Gazprom. before arriving in Kyiv in order to try to pin Rus-
"It has to be said that Nord Stream 2 is not sia down on some sort of compromise deal, but
a German-Russian project; there are companies didn't get very far.
from Germany, the Netherlands and France Merkel wants to use the Russian gas to
there. And therefore it's a European-Russian decommission Germany’s nuclear power sta-
project, it is subject to European law, it is subject tions – an election promise she reneged on
to the law of the Third Energy Package because much to the annoyance of the German elector-
we are not fully free in regulation, but should cite ate – and buy time to continue investing heavily
exactly that, therefore we didn't hold these talks into renewables as the EU’s Green Deal kicks in
from the German side, but we supported that next year that will eventually lead to a reduction
on the European side," Merkel said during her in demand for Russian gas.

P6 www. NEWSBASE .com Week 34 25•August•2021