Nord Stream

Trouble in the pipeline

Mehr Gas-Pipelines gen Westen
The end of the line? Source: DPA

Plans to increase the capacity of the trans-Baltic pipeline between Russia’s huge gas fields and Germany had been firing on all cylinders. Work on the €10 billion ($12.3 billion) Nord Stream 2 project is due to start this year and be completed by the end of 2019, providing large parts of Western Europe with a plentiful and secure supply of gas. Although always controversial, the private venture was viewed as a done deal. But then the German elections happened.

The result of the September vote saw both of the leading parties, Angela Merkel’s conservatives and the Social Democrats (SPD), lose ground. Despite them having thrashed out another coalition deal, the political landscape has changed, and with it, attitudes over Nord Stream 2. This has prompted a nervous response from the German and Austrian companies involved, which are working with Russian state gas giant Gazprom.

“Recently, the public discussion over the Baltic pipeline has turned bizarre,” wrote the CEOs of Wintershall, Uniper and OMV in a joint statement. “Facts are barely considered in the largely superficial, emotionally driven debates.”

“Those who criticize Nord Stream 2 are weakening competition and the safety of supplies.”

CEOs, Wintershall, Uniper and OMV

Apparently concerned that the new government being formed in Berlin may turn cool on the project, Mario Mehren, Klaus Schäfer and Rainer Seele said Europe needed more gas rather than less and that Nord Stream 2 would increase reliability and reduce the so-called transit risk of the pipeline passing through third countries. “Those who criticize Nord Stream 2 are weakening competition and the safety of supplies,” they added.

Critics of the 1,225 kilometer (760 mile) pipeline, which is still on track and will run parallel to the existing Nord Stream 1 pipeline when it opens next year, say that it will increase Europe’s dependence on Russian gas. Up to now, Chancellor Merkel’s government has viewed Nord Stream 2 as a purely private venture and refrained from political interference. The economy ministry, led by the SPD, favored a hands-off approach.

But cabinet posts have been reshuffled in the new coalition, and control of the ministry will pass to the conservatives. They have far greater doubts than the SPD about Nord Stream 2.

Norbert Röttgen, the conservative chairman of parliament’s foreign affairs committee, recently joined with opposition politicians to pen a guest editorial in the Frankfurter Allgemeine Zeitung newspaper headlined “Nord Stream 2 will hurt Europe.”

They wrote that the pipeline would be a “severe blow to Ukraine” because it would lose annual transit fees of €2 billion as a result of being bypassed.

Other CDU politicians disagree, arguing that it’s not the EU’s job to guarantee Ukraine’s income from letting gas flow across its territory. In a guest editorial for Handelsblatt, conservative lawmakers Christian Hirte and Manfred Grund said the project was lawful. The companies agree, arguing that countries like Ukraine and Poland have been particularly critical of the project because they are “transit monopolists that have no interest in a new and competitive gas infrastructure for Europe.”

The designated economics minister, Peter Altmaier, a close ally of Ms. Merkel, will have to weigh the different positions and find a new approach to the project.

In a bid to regulate Nord Stream 2, the EU Commission proposed last November to extend EU internal energy market rules to cover offshore gas pipelines. Under EU rules, companies aren’t permitted to be a gas supplier and pipeline operator at the same time, which would be the case with Gazprom in Nord Stream 2.

But EU officials have said a number of EU member states, and Germany in particular, are resisting the proposal.

Jürgen Flauger covers the energy market for Handelsblatt. Till Hoppe is a Handelsblatt correspondent in Brussels, covering the European Union. Klaus Stratmann covers energy policy and politics for Handelsblatt. To contact the authors: flauger@handelsblatt.com, hoppe@handelsblatt.com, stratmann@handelsblatt.com

We hope you enjoyed this article

Make sure to sign up for our free newsletters too!