Nord Stream 2 as the EU's Hot Potato

07.09.2017

Although the Danish parliament has introduced of a bill that could block the construction of Nord Stream 2, it would still prefer for Brussels to take responsibility, as no single entity wants to take responsibility for torpedoing the pipeline project, Francis Perrin, Senior Research Fellow at the French Institute for International and Strategic Affairs (IRIS), and a specialist on Energy issues told valdaiclub.com.

Large energy projects such as Nord Stream 2 are at the same time commercial and political projects and the operators of these projects, whether private and/or state-owned companies, must negotiate, develop and manage them taking into account these two key dimensions. 

Of course, some projects are more political than others, in particular new Russian gas pipeline projects to Europe and this for three main reasons: 

  • Russia is the leading natural gas supplier of the European Union (EU) with a 33% market share; 

  • one of the priorities of the Energy Union - proposed by the European Commission at the beginning of 2015 - is the diversification of its gas supplies; 

  • and the political relationship between Russia and European/Western countries is rather difficult since the beginning of the crisis in Ukraine more than three years ago.

A public consultation process is underway in Denmark about the environmental impact assessment (EIA) of the Nord Stream 2 gasline project. This process is being conducted by the Danish Energy Agency, which is part of the Ministry of Energy, Utilities and Climate, and covers only environmental issues. The Danish Foreign Affairs Ministry would like to be able to study key energy projects in a more broader perspective including foreign policy and security issues.

This goal can be interpreted as a way to "politicize" the decision-making process for Nord Stream 2. That being said this process is already very political if we keep in mind the hard negotiations within the EU member countries, the involvement of the European Commission and the strong opposition of the U.S. government. 

Will this bill block the Nord Stream 2 project? First it will have to be discussed and adopted, perhaps after some amendments, by the Danish Parliament, which is not a done deal. Not all the main political parties are in agreement about this delicate issue. If this bill becomes a law, it remains to be seen whether the Danish government would really oppose the construction of the Danish segment of Nord Stream 2 (139 kilometers of the pipeline is in Danish territorial waters and the Exclusive Economic Zone).

What is clear is that the Danish authorities are very worried and very embarrassed about this project. They have repeatedly said that this should be a European decision and not only a national one. Apart from Russia, the Nord Stream 2 project will need permits in Finland, Sweden and Denmark, three member states of the EU. There is also a consultation process underway with the three Baltic states and Poland. All of them are also EU member states.

At the end of the day the decision regarding Nord Stream 2 will not be taken in Copenhagen but in Brussels, directly or indirectly. The European Commission asked for a mandate from the EU member states to negotiate an agreement on this project with Russia. As several other European countries, Denmark would be very happy to get rid of this political hot potato.

Estonia, which assumes the Presidency of the European Union in the second half of 2017, would like the European Commission to get a broader mandate including Nord Stream 2 but also other sources/routes of Russian gas imported by the EU. But, once more, the 28 member countries are not on the same line.

Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.

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