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EU battles Russia's Nord Stream 2 slice 'n' dice
Russia is busy trying to slice and dice opposition to the Nord Stream 2 gas pipeline. Although longtime supporter Germany is the jewel in the crown, Gazprom is also keen to offer a share of the spoils to states in Central and Eastern Europe in a bid to split the EU further. Brussels may finally be altering its strategy to face up to the challenge.
Gazprom announced on April 24 that it has closed a €4.75bn financing deal for the construction of Nord Stream 2 with five major European companies, two of them German. The deal secures 50% of the project’s cost from Engie, OMV, Shell, Uniper and Wintershall, but will leave full equity in the Russian state company’s hands, which is a reaction to an injunction against the Western companies’ role in the project due to a Polish legal challenge.
It’s that sort of straightforward loophole that has critics continuing to blast Brussels for a limp-wristed stance on Nord Stream 2. The European Commission suggests it is struggling to find legal means to halt the project, which would add a second 63bn cubic metre a year (cm) pipeline below the Baltic Sea to Germany to the first one that was opened in 2012.
Critics point out that EU objections successfully saw off plans for the South Stream gas pipeline and that gas flows from Nord Stream 1 were limited for years by applying EU rules to the Opal link – the overland pipeline which meets Nord Stream to carry gas to German hubs. However, the arrangement on the onshore section that carries the gas to German hubs was rejigged late last year, opening the way for greater volumes to flow.
The difference, many in CEE would claim, is that Nord Stream 2 has German support. That’s a credible argument. But in the meantime, the EU strategy appears to have shifted somewhat. Weary with trying to block Russian efforts to build pipeline infrastructure to bypass Ukraine, and facing additional resistance from its largest member state, Brussels instead seems to now be seeking to turn the Russian tactic of divide and rule to its advantage.
Thanks to the recent compromise offered by Gazprom to avert the EU’s massive competition probe, which will allow cross-border trading between importers, member states in CEE will have greater leverage in negotiating Russian gas supply deals. That is, assuming they sign up wholeheartedly to the Energy Union and continue to improve cross-border links.
The European Commission surprised in March by announcing the proposed deal with Gazprom. It is now canvassing “opinion” from the CEE states that had previously hoped to see Brussels take a hardline approach to claims of anti-competitive behaviour by the Russian gas giant in supply contracts.
Around the same time, the Commission pushed through rules that allow the EU to be party to the contract talks of member states. However, driven by their stance demanding greater national sovereignty, and likely some less idealistic issues also, some CEE countries have resisted efforts from the EU to involve itself in such negotiations.
Yet that clearly weakens their hand in talks with Russia. Moscow is pouring huge resources into the construction of permanent links to the European market. The EU's challenge is to turn the tables by unifying that market and exploiting Russia's huge economic dependence on it.
Two-way street
While Russia supplies the bulk of gas in CEE, its role in overall EU supply - although the largest - is a far less dominant 30% or so. Meanwhile, a full 75% of Gazprom’s exports head to the European bloc. Moscow’s revenues from oil and gas accounted for over 43% of federal budget revenue in 2015.
Plugging Russia’s gas export business even deeper into the EU via yet another expensive pipeline is no one way street then, despite claims from opponents of Nord Stream 2 that it will simply increase dependence.
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