“Although this US administration has consistently opposed this project, it was already known that it will be completed, whether we liked it or not. That is why we decided to reach an agreement with Germany and abstained from applying new sanctions, and in return the Germans assured us that they would mitigate the risks associated with Nord Stream 2, ” Amos Hochstein, the US envoy for Nord Stream 2, explained to journalists.
Nord Stream 2
Hochstein met with Polish journalists in Warsaw. BiznesAlert.pl was there to grab all the details. Below you will find extensive excerpts from statements made by this politician.
We have not entered into any agreement with Russia on Nord Stream 2. We made an agreement with Germany. The United States does not believe that this is a commercial project, it is not about gas or the market, it is about politics. It is intended to undermine the security of Ukraine, its economy and its role as a transit country through which Russian supplies reach Europe. It is a political project through and through. That is why the US administration opposes it.
It was Joe Biden’s position when he was Vice President, and it has not changed now that he’s the president. We have said time and time again that the United States opposes this project. After the end of Obama’s term, Joe Biden continued to fight this project, not yet with sanctions, but with diplomatic means to work with our partners and allies in the region to delay it. I was working for Biden at the time, and we managed to delay the pipe. We wanted to buy time to mitigate its impact on Europe, should it be completed. We wanted gas supplies to this part of Europe to be diversified in terms of sources, routes and methods. Much in this regard has been achieved since 2015.
Poland is one of the best examples of a successful strategy – it has built an LNG terminal, it is about to complete the Baltic Pipe, it wants to build atom, it has connected its gas pipelines with its neighbors, so if the supply of Russian gas was stopped, it would not matter that much. Other countries have also done this – Lithuania has built a floating terminal, Eastern Europe has built interconnectors with the option of reverse flows, as between Greece and Bulgaria, gas can also be imported from Azerbaijan. These achievements are alternatives that make it impossible for Russia to use gas as a weapon.
All threats related to Nord Stream 2 could not be mitigated. Unfortunately, despite the strong rhetoric of the United States, the sanctions adopted by Congress were not immediately put into effect, and construction continued. It slowed down or stopped from time to time due to the threat of sanctions. The day before President Biden took office in January of this year, stronger sanctions had entered into force, and they were not canceled, but also did not stop the construction. The pipeline was more than 90 percent complete at the time. Although the US administration has consistently opposed this project, it was already known that it would be completed, whether we liked it or not. That is why we decided to reach an agreement with Germany and abstained from applying some of the new sanctions, and in return Germany assured us that it would mitigate the dangers of Nord Stream 2.
Germany agreed to appoint a special envoy to assist in negotiations on the maintenance of gas transit through Ukraine. We agreed that transit through Ukraine must be maintained, regardless of transit via Nord Stream 2. In addition, if Russia uses gas as a weapon, or threatens the security of Ukraine, the United States and Germany, also acting within the framework of the European Union, will implement appropriate measures against Russia. US sanctions against Russia were imposed after the annexation of Crimea and they are still in place. We continue to help Ukraine with regard to its security, President Zelensky was in Washington. At the end of this visit, we made a joint statement with the government of Ukraine on cooperation in the field of security, economy and strengthening of our ties. In its statement, Germany assured about the application of the Third Energy Package to Nord Stream 2, which was approved by the higher court in Dusseldorf – we are grateful for this and we expected this verdict, in which the Polish PGNiG was also involved. Germany also announced the adoption of a green fund of USD 175 million, but it is expected to grow to USD 1 billion, with additional funds from the private sector. Its goal will be to support investments in renewable energy in Ukraine. This money is not intended to replace the profits lost due to Nord Stream 2. Ukraine and Gazprom signed a ship or pay contract, with the obligation to pay for transport until 2024, and it should be extended. During this period Ukraine will receive payments for transit. We want to support energy transition around the world. Ukraine will also move away from coal and other fossil fuels in favor of renewables.
We believe that Germany will live up to its obligations. Their envoy for transmission through Ukraine has already been appointed (Georg Graf Wandersee – ed. ). He has already been to Ukraine and Moscow, our teams work together on a daily basis, we have already held many discussions on this issue, and during my visit to Berlin we will talk with our German counterparts about the implementation of the provisions. I can say so far that Germany is taking this matter very seriously. Chancellor Angela Merkel said publicly that she fully supports the maintenance of transit through Ukraine. First of all, we want the Russians to understand that transit should be maintained. There is no reason to say that they will stop the transmission, there is the contract from 2019 that sets the volume, and we expect that they will comply with it. The Russians always claim that they keep their end of the bargain and accuse others of not doing so, but we will constantly remind them that they have a contract with Ukraine. The United States is obliged to help Kyiv, and I believe that since 2014, since the Maidan revolution, this has been the case. We support Ukraine in the areas of security, economy, energy, financial institutions, and continue to support the reform agenda.
However, energy security in Europe is not just about Nord Stream 2. It cannot be that we focus on one area, while Russians will act on other fronts to undermine our efforts. At the end of the day, it all comes together. We see what is happening with the second line of the Turkish Stream, we see that other countries are signing contracts with Gazprom. We must insist that the Third Energy Package also applies to the second strand of the Turkish Stream. European law must also apply there. We need to make sure that while we are focusing on Nord Stream 2, President Putin isn’t stepping through the back door to achieve his goals. Looking at the gas pipelines from Ukraine to the Balkans, you can see that the transmission has fallen dramatically. At the same time, deliveries through Serbia from the south increased by about the same level.
When we ask what may happen in Ukraine due to Nord Stream 2, we can take a look at what is happening on other existing routes. We must maintain physical energy security, and at the same time pursue the green transition. For a long time, Western Europe has had a diversified energy sector, while eastern Europe has not. I think it would be a tragic mistake if the energy transition in Central and Eastern Europe and the Balkans went slower than in the west. We should treat the transition as a period of alignment. I’m not naive, and I know that the Russians will use every tool they have as a weapon. The question remains whether we will allow them to do so. We must resist strongly and weaken the effectiveness of their weapons. To do this, we need to be energy independent and create energy sectors for the 21st century.
Poland-Ukraine-USA agreement on LNG
The United States supports the energy dialogue between Poland and Ukraine, and translating it into practical action. There are many ways to secure supplies to Ukraine. We need to talk about what needs to be done to prevent the worst case scenario from happening. Cutting off Ukraine’s gas supply could leave it vulnerable in the winter if it does not have alternative supplies. This is an area where Poland and Ukraine could work together. Whether it is a new gas pipeline or another way of supplying – we must be sure that the ultimate goal will be achieved. I will not go into a discussion on how this should be done specifically – whether there should be a gas pipeline between Poland and Ukraine, or through Slovakia, or in a virtual way. There are many solutions, but the most important thing is that it needs to ensure security and be commercially viable. We should focus on projects that are doable, and that need to be addressed by both sides. The more we integrate Ukraine and the Baltic states into the European energy system, the more resilient and secure we will be throughout Europe. Poland should and wants to be more involved in energy integration with Ukraine and the Baltic states. It is not the role of the United States to point to specific projects, because Ukraine has more knowledge on this subject.
Currently, LNG exports from the United States are operating at the highest level. Today gas prices in Europe are at one of the highest levels in history, despite the supply of LNG from the US and other places. These increases are also caused by non-market elements. There is a risk of gas shortages in Europe this winter. The amount of gas in storage in Europe is below the five-year average, which is concerning to me. Gas prices are breaking records, currently they are higher in Europe than in Asia. Meanwhile Russia, which is one of the main gas suppliers to Europe, is reducing its supply significantly. It is also difficult to predict whether we will run out of gas, because we do not know whether the coming winter will be mild or severe. However, we cannot allow a situation where in case of a severe winter we won’t have enough gas. Climate change is making weather unpredictable. Energy talks should take this into consideration as well. We are going through a transformation, and perhaps in a few years gas will not be the primary source of heat. Meanwhile, in many parts of Europe, gas is not used for energy generation but for heating, which means that renewables are still not an alternative and a competitor to gas in the heating sector. Until we electrify heating with renewables or the atom, we have to use what we have. We need to secure gas supplies to survive the winter, and this applies to Ukraine, as well as to any other country that has less diversified supplies. LNG can help in this respect in countries such as Spain, Portugal and Poland, but not in Bulgaria, Romania or Moldova, which depend on gas from pipelines, often from one direction.
If a year ago I had said that today gas prices in the off-peak period will be at USD 18-19, most market participants would have thought that I was crazy. I do not know if a similar scenario can happen in Europe, as last winter in Texas. No one could say for sure that this will not happen. I know that companies are preparing for such a possibility. At the end of the day, it is about securing short-and medium-term gas supplies. In the longer term, we will not be talking about gas as the main fuel, and therefore the energy transition could change energy security in the region. If we were to accelerate the transition, the potential of the Russian “weapon” would be reduced.
US nuclear power in Poland
Nuclear energy talks between the United States and Poland are still ongoing. I think that nuclear power is a clean and efficient option, and we want cooperation with Poland, we are in similar talks with Ukraine. An agreement was signed in Washington between Westinghouse and Ukrainian Energoatom, and talks are underway on SMR technology. We are looking at options that will deliver more power to the network, will be clean, safe and stable. All these topics – Nord Stream 2, nuclear and RES are part of the same strategy.