Nord Stream 2 likely to avoid South Stream fate, despite Russian frustration

24 October 2018 12:14pm

20 June 2018. By Emily Waterfield.

Russia is showing increasing frustration at the EU’s indecisiveness on the controversial Nord Stream 2 pipeline.

The country’s ambassador to the EU, Vladimir Chizhov, said earlier this month that Moscow and international energy companies "can't make huge investments only to lose approval" — raising the specter of the earlier South Stream project, which Russian President Vladimir Putin unexpectedly abandoned in late 2014, blaming EU obstructionism.

Investors in Nord Stream 2 remain confident, on the surface at least, that Putin won’t pull the plug again, despite being under western sanctions and facing the threat of more. The project, if completed, will bring economic benefits to Russia as well as increasing its control over EU gas markets. That probably makes it worth enduring the political uncertainty.

"Russia has by now got used to living in this unfavorable environment of sanctions," said the ambassador, speaking at the Permanent Mission of Russia to the EU in Brussels. "I don't think that the threat of sanctions would keep either myself or my colleagues, here or in Moscow, awake at night."

He pointed to support from big brands including Mercedes-Benz, Citibank, General Electric, MasterCard and Huawei — all listed as partners at the Saint Petersburg Forum this year — as evidence that the Russian economy was strong despite EU and US sanctions.

The Nord Stream 2 project, which would bring an additional 55 billion cubic meters of gas to Germany along the route of an existing Nord Stream pipeline (see here), now has backing from companies including Engie, OMV, Shell, Uniper and Wintershall.

Chizhov said he was "moderately optimistic" about the plan being implemented. Still, his comments suggest that Moscow is becoming irritated with the EU’s laborious decision-making process.

— Mixed messages —

The EU has struggled to agree a clear message on Nord Stream 2.

The European Commission has repeatedly said that buying more gas from Russia’s state-owned Gazprom runs counter to EU policy, which encourages the uptake of renewable energy and less dependence on Russia for fossil fuels.

And central and eastern European countries such as Poland fear that Nord Stream will tie them more closely to Russia and are looking to the EU to strike deals with other exporters, such as Norway.

But, importantly, the project has the support of Germany, which buys more Russian gas than any other country does. In February, German leader Angela Merkel said Nord Stream 2 posed no threat to EU energy security.

EU climate and energy commissioner Miguel Arias Cañete says Nord Stream 2 could only be blocked for economic or regulatory reasons — though he also cites “geopolitical uncertainties” surrounding Russian gas.

Poland's national energy company PGNiG, meanwhile, said in May that sanctions are the only way to stop Nord Stream 2.

— Continued confidence —

Sebastian Sass, Nord Stream 2’s EU representative, told MLex that there is "good reason for continued confidence because the project is progressing well.”

Asked if there was any risk of a repeat of the fate that befell South Stream when it comes to the more recent planned pipeline, Sass said "I have a much more positive view on the situation.”

“Practical implementation of the project continues according to plans," he said.

Nord Stream 2 on June 7 won construction permits from the Swedish government, to add to permits already granted in Germany and Finland.

Denmark is now the only EU country along the pipeline route not to have approved construction. Under new Danish laws, Copenhagen says national authorities could block the construction of the pipeline on security grounds.