What’s next for Nord Stream 2? “Not all is lost yet”

The Nord Stream 2 gas pipeline will face serious legal problems in 2022, predicts Thomas O’Donnell, energy market analyst from Berlin. In addition, the project may finish off European and American sanctions for any Russian military intervention in Ukraine, he adds.

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– On November 16, the German network agency (BNetzA), which has to consider Nord Stream 2 AG’s application to operate the gas pipeline, suspended the proceedings, demanding that Gazprom completely relocate its operations from Switzerland to Germany. Then, on December 17, the regulator announced that it would not be able to make a certification decision in the first half of 2022, reminds O’Donnell, energy market analyst, lecturer at the private Berlin-based Hertie School of Governance and author of the blog “The Global Barrel”.

As emphasized by the company Nord Stream 2 AG, which has built the gas pipeline and is its sole owner, has a serious problem with demonstrating that although it is wholly owned by Russian Gazprom, it can be an “independent”, “competent” and “neutral” pipeline operator in accordance with the applicable EU legislation.

– This is exactly the situation that Moscow and Berlin feared the most while pushing for the project. After all, Angela Merkel officials (until recently the chancellor of Germany – editor) have traditionally rejected the accusations of European and American allies that the gas pipeline will further increase Russia’s advantage over Ukraine. They repeated over and over that this is not a geopolitical project, but only a commercial one, says O’Donnell.

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A bluff from Berlin and Moscow?

According to the expert, in retrospect, it is possible to argue that the “disregarding self-confidence” of Berlin and Moscow was a bluff and was to cover their real fears that the project would be “finished” not only by US sanctions, but also by EU competition law. Consequently, Nord Stream 2 AG has adopted four further strategies to address this problem, but none has produced satisfactory results.

– The EU’s third energy package prohibits the owner of the transported gas – here, Gazprom, the Russian state’s export monopoly – from having more than half of the gas pipeline transporting its gas. It also requires neutral granting of access to third parties to gas transmission and other antitrust measures, the expert reminds.

As he notes, “therefore, at the project’s inauguration ceremony in September 2015 in St. Petersburg, five European energy companies entered into cooperation with NS2 AG and each of them pledged to share a total of 49% of shares in the project. the pipeline. The purpose of the runway was clear: if necessary, this percentage could be increased by one or two percent. ”

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Decision of the Polish Office of Competition and Consumer Protection

– Just 19 months after Russia’s invasion of Ukraine, it was also expected that this joint ownership would provide political cover for the project. The whole plan, however, failed. In 2016, the Polish Office of Competition and Consumer Protection (UOKiK) issued a decision against EU companies for failing to consult Polish entities on the impact of the project on the competitiveness of the domestic gas sector. European courts upheld this decision. The Court of Justice of the EU also stated in another case related to Gazprom and Germany that + energy solidarity + is guaranteed by the EU treaties. In April 2017, Gazprom’s EU partner companies signed contracts for financing the project, but it was already 100 percent. owned by Russia – emphasizes O’Donnell.

Another strategy was to find a company to buy half of the pipeline. BASF or Gascade, a pipeline company owned by BASF and Gazprom, were the obvious choice in this context, the expert analyzes.

– However, each potential buyer listed on the stock exchange had to take into account the risk associated with potential US sanctions. Considering Moscow’s unpredictability, it was very high in the next 25-30 years of investment.

“The Fight Is Still Going On”

At the same time, however, anticipating the difficulties, both Russian and German officials tried to impose a narrative and legal interpretation that the EU’s Third Energy Package does not apply to seabed pipelines. On October 28, 2015, the then German Vice-Chancellor, Sigmar Gabriel, visited Putin in Moscow and promised that the gas pipeline would be approved in accordance with German, not EU law.

– As a result of the intervention of the legal services of the European Commission, the administration of the then head of the European Commission, Jean-Claude Juncker, the European Parliament and Emmanuel Macron in the Council, Angela Merkel had to agree to the adoption of an amendment extending the application of the third package in Germany. Now the gas pipeline is subject to EU law, O’Donnell points out, stating that this is not a reason to beat the victory.

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– Since Gazprom could not sell half of Nord Stream 2 due to the risk of sanctions, the only option it has now is to say that Nord Stream 2 AG is an “independent” company. From a legal point of view, this is an absurd claim and indefensible in the light of the previous jurisprudence of the CJEU. Anyway the possible consent of the BNetzA has yet to be considered by the European Commission and it is understandable that Poland would question the final consent in the Court of Justice of the EU. In short, the fight is still going on, concludes Thomas O’Donnell.

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