After Russia recognized the independence of the Donetsk and Luhansk People’s Republics (DPR and LPR), the German authorities are unable to continue certification of the Nord Stream 2 gas pipeline. This was announced by German Chancellor Olaf Scholz. Reuters.
In addition to the announcement of blocking the project, Scholz announced a decision on the first package of additional sanctions against Moscow, which the EU authorities will announce during the day. According to him, the European community cannot accept the actions of Russia, therefore it is forced to react.
Today I asked the Ministry of Economy of Germany to withdraw the existing report with an analysis of energy security from the Federal Network Agency (BNetzA). It sounds technical, but it is a necessary administrative step to prevent the pipeline from being certified now.
Shortly after these words, the head of the department, Robert Habek, announced the suspension of the certification process for the Nord Stream 2 gas pipeline. Against this background, the cost of gas on European sites is growing rapidly. Compared to the close of trading on February 21, the growth reaches ten percent, the price of a thousand cubic meters again exceeded $900.
Slipped for a long time
They wanted to put Nord Stream 2 into operation at the end of 2019. The new supply route was opposed by Ukraine, Poland, the Baltic countries, as well as many European politicians. They argued that the gas pipeline was not an economic project, but a geopolitical weapon for Russia, with which it wants to put additional pressure on Ukraine. The Kremlin and Gazprom have consistently denied such plans, pointing out that it is about the reliability of gas supplies to European consumers, which the Ukrainian gas transmission system (GTS) cannot guarantee.
The United States turned out to be the most influential adversary, which, shortly before the completion of the laying, threatened the companies involved in the work with sanctions. Construction stopped for a year and a half. In September 2021, Nord Stream 2 was fully built, after which commissioning began and an application for certification was submitted.
The sharp rise in gas prices in Europe led some experts to believe that Gazprom will be able to quickly get permission to launch a new route, but the reality turned out to be much less positive for the Russian company. The stumbling block was the updated Gas Directive from the EU’s Third Energy Package, under which the gas pipeline operator should be a company independent of the supplier. Otherwise, this supplier will be able to occupy no more than half of the capacity of the gas pipeline, which did not suit the Russian export monopolist.
The project operator Nord Stream 2 AG, a subsidiary of Gazprom, tried to achieve certification, but abandoned these plans in November. The company decided to create a new company to manage the gas pipeline section in Germany. The establishment of the subsidiary Gas for Europe GmbH was announced only on January 26, but the process of its certification has not yet begun, since the German regulator has not received the necessary documents.
Expected Solution
In mid-December, the head of BNetzA, Jochen Homan, doubted that the gas pipeline could be launched before the second half of 2022. By the end of January, Europe had managed to obtain enough LNG from the US to get through the winter period, so there was no need to count on a hasty decision.
The connection between the rise in tensions around Ukraine and Nord Stream 2 has been known for a long time. In January, EU High Representative for Foreign Affairs and Security Policy Josep Borrell stressed that Russia’s aggression against the republic would lead to the refusal of certification.
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The project caused a conflict in the EU, in fact, Germany, as well as Gazprom’s partner companies in the project, remained its main supporter by that time. Thus, in a situation where Europe and the United States promised sanctions in case of any change in the current situation in the east of Ukraine, the gas pipeline looked like the first and obvious target.
Are there alternatives?
The problem of Russian gas supplies to the EU countries has several dimensions. First, of the operating pipelines, only Nord Stream and Turkish Stream are fully operational. Only half of the prepaid volume goes through the Ukrainian GTS, and Yamal-Europe in the direction of Germany has been idle since December 21.
Secondly, Gazprom refuses in principle to supply gas to stock exchanges, selling fuel through long-term contracts, which means that the current situation is related to the lack of European applications for additional supplies. In confirmation of this opinion, the head of the German Ministry of Economy, Robert Habek, announced his desire to look for other sources of natural gas, since Russia has shown itself to be an “unreliable supplier.”
Russia doubts that the EU can survive without Russian fuel. Thus, Dmitry Medvedev, deputy chairman of the Russian Security Council, believes that with such a policy, the Europeans will have to pay two thousand euros per thousand cubic meters of gas. Russian Energy Minister Nikolai Shulginov is confident that there is nothing to replace Russian gas with, moreover, significant volumes of it are secured by long-term agreements.
Russian Foreign Ministry spokeswoman Maria Zakharova said that the suspension of Nord Stream 2 certification is political pressure on business and the energy economy.
All the talk of Westerners that it is impossible to link energy issues with politics turned out, as they often do, to be empty words.
Nord Stream 2 AG is awaiting proper information on the gas pipeline certification process in Germany from regulators in order to understand its next steps, the company said.
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