Page 14 - bne IntelliNews Newspaper 280417

Eastern Europe
April 28, 2017 www.intellinews.com I Page 14
EU battles Russia’s Nord Stream 2 slice ‘n’ dice
bne IntelliNews
Russia is busy trying to slice and dice opposi- tion 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 Eu- rope 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 construc- tion of Nord Stream 2 with five major European companies, two of them German. The deal se- cures 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 limit- ed 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 arrange- ment on the onshore section that carries the gas to German hubs was rejigged late last year, open- ing 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 cred- ible argument. But in the meantime, the EU strategy appears to have shifted somewhat. Weary with trying to block Russian efforts to build pipeline infrastruc- ture to bypass Ukraine, and facing additional resist- ance from its largest member state, Brussels in- stead 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, as- suming 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 hard- line approach to claims of anti-competitive behav- iour 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 sov- ereignty, 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 Eu- ropean market. The EU's challenge is to turn
the tables by unifying that market and exploiting Russia's huge economic dependence on it.