Russia threatens to stop talks with Ukraine if it does not give up all claims. The German parliament wants to weaken the gas directive aimed to entrap Nord Stream 2. These are stress tests for the European Commission, which cannot be subject to Berlin and Moscow to maintain credibility in other capitals, such as Budapest or Warsaw – writes Wojciech Jakóbik, editor-in-chief of BiznesAlert.pl.
Stress tests of Nord Stream 2 defenders
Stress test is a strength test that allows you to assess resistance to a crisis. For example, a test of this kind was carried out by the European Commission to determine whether the Regulation on the security of gas supply (SOS) guarantees the continuity of supplies of blue fuel in various scenarios of problems with transmission through Ukrainian territory. It seems that the two capitals politically involved in the disputed Nord Stream 2 gas pipeline have decided to carry out such a stress test on a newly appointed European Commission.
First try: Moscow
The first attempt is Moscow’s actions in the course of gas talks European Commission-Ukraine-Russia. Shortly after the next round of negotiations on October 28, the Russians confirmed their expectations towards Ukrainians. The transmission contract to ensure gas transmission through Ukraine in 2020 will be signed under the condition of abandoning any arbitration claims by the Ukrainian side. Naftogaz accepts the possibility of lowering expectations, but will not abandon them completely. This is a recipe for prolonged talks desired by the Russians in the face of the delay of the Nord Stream 2 gas pipeline, which only at the end of October received the last necessary consent for construction in Denmark.
The expectations of the Russians are a challenge for the European Commission, which should not accept the package approach, which assumes that political talks about gas supplies can be combined with a discussion questioning the legal path of seeking arbitration. The court has already confirmed Naftogaz’s expectations and can support them in subsequent judgments. The Russians want to use politics to challenge its judgements. The European Commission is the only institution that can respond to Moscow’s unjustified expectations at the expense of prolonged talks, unless it wants to seek an agreement at all costs. It is worth recalling that the record-high storage at Gazprom’s disposal in Europe and Ukraine suggest that the sides are ready for extended talks during the heating season.
Second try: Berlin
The second attempt is the German parliament, which is required to transpose the revised gas directive. The new regulation is to subject the said Nord Stream 2 to antitrust regulations, and thus reduce the risk of using this gas pipeline for political purposes. The need to adapt the project to EU law would mean that Gazprom cannot simultaneously manage the infrastructure and supply it with gas, and therefore would require a change in Russian legislation that gives it a monopoly on exports and the separation of a new company to become an independent operator. This is a waste of time and money for Nord Stream 2, so the ruling coalition in Germany intends to help it by ratifying the amendment to the gas directive with a change in the record describing which investments are to be subject to it. It was originally intended to cover all projects not completed before May 23, 2019. Such projects, and thus in practice – just Nord Stream 2, could not count on being excluded from this right. The coalition would like to change this provision and allow for the possibility of excluding projects in progress.
This is another challenge for the European Commission, which oversees the transposition of the gas directive in a new form and has the right to reject the Bundesnetzagentur regulator’s request for exemption for Nord Stream 2. However, beforehand there will be talks between the Commission and Berlin on how to implement the new law and here a weak Commission can give way to Berlin. However, if it considers the method of transposing the gas directive to be incorrect, it may institute an infringement procedure similar to the one initiated against Poland in the matter of judicial system reform.
How strong is the European Commission?
The new European Commission has bold plans for climate policy. However, its effectiveness will depend on whether it defends credibility in the Nord Stream 2 dispute. If it succumbs to the dictates of Berlin and Moscow on Nord Stream 2, which can be judged by its response to the above-mentioned challenges, it will be difficult for it to expect compliance with other capitals of a more ambitious EU climate policy. If Brussels gives way to Berlin and Moscow, it will not be able to expect Budapest or Warsaw to obey. This would be a simple recipe for the actual disintegration of the common European policy in the field of energy and climate and another symptom of the crisis of EU integration. Will the Commission pass the stress test of Nord Stream 2 defenders?