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Austria and Germany are blocking the works on the Gas Directive, which may subordinate the contested Nord Stream 2 to EU law, using fatigue of the topic in Brussels – writes Wojciech Jakóbik, editor-in-chief of BiznesAlert.pl.
The Gas Directive is stuck
Nord Stream 2, a draft gas pipeline from Russia to Germany across the Baltic Sea, is perceived by supporters as a source of cheap gas. It is important for the competitiveness of Western companies that have been financially involved in the project: BASF/Wintershall, E.on/Uniper, OMV, Shell and Engie. The economic basis for construction, in addition to the loans of those companies that finance the work, are gas contracts. It is probably for this reason that the Austrian OMV has recently extended the gas contract with Gazprom.
However, according to Brussels, this project is not in line with the objectives of the Energy Union and will not increase Europe’s energy security. In addition, it should be subordinated to EU law. Opponents of the project are counting on this, pointing a number of risks associated with it in the areas of: politics, law, market, security and the environment. The European Commission’s proposal assumes the amendment of the Gas Directive in order to extend its provisions to the entire territory of the European Union, and therefore also gas pipelines from third countries, such as Nord Stream 2. After passing the European Parliament, the proposal for revision went to the European Council and got stuck .
Despite the efforts in which Polish diplomacy and members of the European Parliament took part, the European Council’s work on the Gas Directive has not yet been launched. According to BiznesAlert.pl, the problem remains Austria and Germany, which are less officially supported by Bulgaria and Greece. Meanwhile, the Bulgarian Presidency is ending and the Austrian is coming, and no improvement should be counted on unless new circumstances arise which will, above all, incite Chancellor Angela Merkel to act on the Nord Stream 2 issue. We can argue that in this way, Austria and Germany break down the political umbrella on the project despite the continuing declarations of a purely economic nature of this investment.
Consortium in Ukraine
Instead of talking about the Gas Directive, the German side prefers to respond to the basic argument against the construction of a new gas pipeline from Russia and Germany, that is fear of destabilizing Ukraine by reducing gas supplies through its territory in favor of Nord Stream 2. Berlin promotes the idea of creating a consortium of companies from Ukraine, The European Union and Russia, which would manage the gas pipelines on the Dnieper and thus guarantee the stability of transmission at the “minimum” level, which will be jointly agreed. The participation of a German company would ensure that it would be in its economic interest to maintain supplies and modernize this infrastructure.
This suggestion was enough to expand the topic of the Nord Stream 2 gas pipeline in Brussels. The Eurocrats are currently shaping the new EU budget, which is awaiting the fundamental changes that have already been reported by the media. With them, the Nord Stream 2 pipeline problem seems less important, especially given the calming signals from Berlin that a solution has already been found. However, these may be false hopes.
The revision of the Gas Directive was one of the ways to at least delay Nord Stream 2 by the need to negotiate the conditions for implementing the amended law relative to the project with Russia. If the agreement were to be approved by the European Parliament, it would be possible to block it if the Chamber fails to support it. The second way is US sanctions that could hamper the financing of the project by hitting the European project’s financial partners.
Meanwhile, the US has still not decided on sanctions. The words of Deputy Secretary of State for energy diplomacy, Sandra Oudkirk, are significant – during the German Marshall Fund conference and the Polish Institute of International Affairs she admitted that although the US has tools to block Nord Stream 2, Europe also has them. Unfortunately, for the opponents of the project like Poland, there is no appetite for such action, and the expansion around this topic only exacerbates the situation.
Detente
Detente (expansion in international relations – author’s note) in the relations of some European Union countries with Russia is also visible in a broader context. French President Emmanuel Macron visited the International Economic Forum in St. Petersburg, where French Total signed a contract with Novatek on taking over 10 percent of the Arctic LNG 2 project. Although he refused to support Nord Stream 2 financially, the Russian company with whom he signed the contract is the list of Western sanctions. In turn, the President of the Russian Federation visited Austria, where he appealed for abolition of sanctions, for which – although that was not enough – there was no positive answer from Vienna.
In spite of maintaining the European consensus that Russia has not met the conditions necessary to abolish restrictions, that is, giving Crimea back to Ukraine and stopping the fights in the east of the country, the Nord Stream 2 project benefits from expansion, which allows it to conquer subsequent milestones without any obstacles. Recently, it received further approvals for construction in exclusive economic zones: this time Sweden and Russia. It is still waiting for Denmark’s consent. Although the Scandinavians admit their concerns about Nord Stream 2, Sweden did not find procedural grounds to reject the request to build a section on its territory. It may be different in the case of Danes, who adopted the law allowing for the consideration of consent from the point of view of foreign policy and security. Copenhagen recognizes Nord Stream 2 as a challenge in this field. It is worth noting once again that the project may be delayed now, because consents are granted slower than the original expectations of Nord Stream 2.
The necessity to revise the project assumptions and replace the Danish section with others may lead to the delay of the project, whose construction is to start in the summer of 2018. This would allow time for further work on the revision of the Gas Directive, whose final shape may also have a different impact on Nord Stream 2. Proponents of subordinating this draft Directive want to include all projects that did not start commercial work, in which case it would be the case of the gas pipeline at issue even after the construction starts. If, however, the European Council would recognize that the amended Directive should cover only new projects understood as such, which construction has not yet started, the paralysis of works caused by Austria and Germany may jeopardize the chances of subordination to Nord Stream 2 of the revised law that will change after the first spade into the ground. Proponents of the project do not like the European Commission’s proposal, so they changed the subject. It is not known whether the opponents of the bus from Russia to Germany will be able to bring him back to the top of the European Union’s subjects troubled by even greater problems.
