Russians are shamelessly blackmailing Europe with high gas prices in order to launch Nord Stream 2 as soon as possible. Members of the European Parliament are concerned the investment will be launched illegally. However, with the support of the European Commission, the opponents of this project still stand a chance at turning it into a ruin. PGNiG joins the dispute over certification – writes Wojciech Jakóbik, editor-in-chief at BiznesAlert.pl.
Will Nord Stream 2 operate illegally?
MEPs wrote a letter to European Commission Vice-President Margrethe Vestager calling for an investigation into Gazprom’s market manipulation to promote the controversial Nord Stream 2 pipeline. The missive also contains a much more important, but underappreciated provision on the need to introduce countermeasures in the event that the pipeline starts operating illegally. “The Commission has at its disposal prerogatives from Article 8 of Regulation 1/2003 on the possibility of applying temporary measures against Gazprom if Nord Stream 2 starts operating illegally, as well as other measures necessary to bring its activities in line with energy and competition regulations in the European Union,” says the letter drafted by Andrius Kubilius, MEP responsible for reports on Russia, and signed by MEPs from various countries and different sides of the political divide Buzek, Marek Belka, Robert Biedroń, Adam Bielan, Witold Waszczykowski, Elżbieta Rafalska, Elżbieta Kruk, Zbigniew Kuźmiuk, Beata Kempa, Anna Zalewska, Andrzej Halicki and Anna Fotyga. The Article 8 of Regulation 1/2003 of the Council of the European Union pertains to antitrust laws whose goal is to prevent abuses and impose sanctions for infringing on the rules. This is an old-new field for possible litigation, because Poland’s Office of Competition and Consumer Protection, acting on the basis of European law, is already questioning the compliance of the Nord Stream 2 financing model with antitrust laws. The illegal launch of this pipeline could be the basis for further action and sanctions.
The letter was the lawmakers’ reaction to the suggestions made by Gazprom that it could begin deliveries via Nord Stream 2 on October 1. However, even this company admits that this will not be possible without certification, a process which needs to face its own obstacles, we have already described in BiznesAlert.pl, and which the European Commission is also talking about. The press secretary of the European Commission Vivienne Lunela was quoted by the PRIME agency as saying that Germany’s Federal Network Agency (Bundesnetzagentur) had four months to prepare a draft decision on the application of the Third Energy Package to Nord Stream 2. “First, the draft will be presented, and only then will the procedure be continued. Once the European Commission receives it, we will have two months to respond, with the possibility of extending the deadline, ” she added. The Russians are doing everything to speed up or bypass this process, including blackmailing the Old Continent with high gas prices, for which they are partly responsible. They have suggested that Nord Stream 2 could transmit technical gas needed for testing within a month or two. They are also considering allowing Russia’s Rosneft to access the disputed pipeline in order to comply with one of the regulations of the Third Energy Package, that requires allowing third parties to access the capacity of transmission infrastructure.
Opponents still have a weapon against Nord Stream 2
“As regards the certification procedure, all draft decisions of Member States’ regulatory authorities on certifying a transmission system operator need to be submitted to the Commission for an opinion. The draft decision on the certification of Nord Stream 2 pipeline has not yet reached the Commission for its opinion. Further steps in this process will depend on this opinion request. In addition, the construction of the Nord Stream 2 pipeline is subject to national law (in the countries through which the pipeline passes coastal waters),” the Commissioner for Energy Kadri Simson explained in response to questions from Anna Fotyga, Polish MEP, quoted by the Polish Press Agency. Reinhard Butikofer of the German Greens, who signed the letter prepared by Kubilius, argues in Die Zeit that if the European Commission decides that the decision of the German regulator – Bundesnetzagentur is against the EU rules, Nord Stream 2 “may turn into an investment ruin” and deliveries will not start.
Meanwhile, the Poles won another victory in the dispute over Nord Stream 2. PGNiG has been admitted to the process of certification of the operator of this pipeline in German waters, namely Nord Stream 2 AG. According to the Poles, this company, which is 100% owned by Gazprom, will not be independent and should not become the operator. Without the operator, there will be no deliveries. PGNiG will have an insight into the process and may have reservations about its outcome and therefore challenge it, if necessary, in the European Commission or in the courts throughout the Union. The principle of energy solidarity will come in handy in this instance as well. This precept has been recently confirmed by an CJEU verdict, another court victory of Poles, which said that the principle needs to be applied to such projects as OPAL, the Nord Stream 1 leg in Germany, and that investments of this kind cannot undermine the interests of other member states. This is a precedent that can be used in disputes over Nord Stream 2, which is considered by PGNiG a threat to energy security.
Another obstacle are the existing US sanctions on companies wishing to insure and technically certify Nord Stream 2. Without such certification and insurance, the pipe cannot be launched. These sanctions can be expanded by those proposed in the 2022 National Defense Authorization Act (NDAA).
The House Rules Committee has already adopted a number of propositions for the 2022 NDAA. Among them was the proposal for new sanctions against the disputed Nord Stream 2 to prevent its launch. The bill still needs to be approved by the Senate and signed by President Joe Biden. The amendments introduced by the House of Representatives impose on the president the obligation to implement sanctions on companies and individuals involved in the planning, construction and commissioning of the contentious Nord Stream 2 gas pipeline. Its construction was completed, but it has not launched yet.
The lawmakers are also demanding a report from the Pentagon and the US State Department on the Kremlin’s financial benefits from Nord Stream 2, and the ensuing security risks for Ukraine and NATO allies. The 2022 NDAA as adopted by the House will have to be implemented by the Joe Biden administration. President Donald Trump was obliged to implement the first sanctions against Nord Stream 2 in a similar fashion.
Interestingly, the draft budget proposed by the House of Representatives also calls for increased cooperation between the US and Ukraine in the titanium sector, and for an increase in the presence of American armed forces in Poland, Romania and the Baltic countries. The 2022 NDAA in the form proposed by the House requires the White House to determine whether thirty-five Russian officials deserve personal sanctions. That group includes the presidents of Rosneft and Gazprom. The document must be adopted by the Senate and signed by the president. It is worth reminding that the current US sanctions target companies that can provide technical certification and insurance for Nord Stream 2.
Different degrees of danger posed by Nord Stream 2
If the Europeans do not succumb to Gazprom’s blackmail in connection with the gas price crisis, a lot of time will pass before deliveries through Nord Stream 2, which has already been delayed by almost two years, begin. It can actually turn into a financial ruin. If Russians manage to align the pipe with EU rules, it will not pose such a significant threat to the energy security of Poland and the European Union, although it will still be an existential threat to Ukraine.