Valdai Club

Various EU forces would do their best to put off the implementation of Nord Stream-2 until 2019, when Russia and Ukraine are to sign a new gas transit agreement.

Last week Reuters reported that eight EU governments – Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, the Czech Republic, and Estonia – signed a letter to European Commission President Jean-Claude Juncker objecting to the Nord Stream-2 project that would double the amount of gas shipped directly from Russia to Germany.

Danila Bochkarev, a fellow at the Brussels-based EastWest Institute, said this move would not hinder the project, but there are influential forces seeking to delay it, and not only among the East European members of the EU.

“This letter carries no legal weight, because the European Commission has no final say in the case of Nord Stream. The project only concerns the countries across which the pipeline will be built, namely Finland, Sweden, Denmark and Germany,” Bochkarev told valdaiclub.com.

According to Bochkarev, none of these countries will have grounds to reject the project, just as in the case of the first Nord Stream pipeline. “If the project meets all technical and environmental standards, they will be unable to stop it. Problems will only arise when the pipeline reaches dry land, where the European Commission will be able to limit the throughput capacity of the pipeline arguing that Gazprom can only use 50 percent of the pipe,” the expert said.

The letter to the European Commission was signed by “anti-Russian countries and those that receive gas via Ukraine,” Bochkarev said. Those that receive Russian gas via Ukraine worry that the route via Germany would reduce their transit revenues and create logistic problems. “Slovakia’s gas transit revenues amount to between $400 and $500 million dollars a year, which is a substantial part of its budget. Poland has been trying to become a gas hub by selling both Russian natural gas and LNG to other countries in the region,” he said.

However, not only East European EU countries are worried by the possibility of Ukraine losing its gas transit status. According to Bochkarev, rerouting gas to Germany would have catastrophic consequences for Ukraine, while Europe will have to incur expenses.

“A decrease in the volume of gas transported via Ukraine would not just reduce its substantial transit revenues, which stand at between $1.5 and $2 billion a year, but would also affect the domestic market, where gas produced in Ukraine is also sold. Since the transit of Russian gas is synchronized with home gas deliveries, falling pressure in the pipe would complicate Ukrainian consumer gas supplies,” Bochkarev said.

The project will also have major political consequences for Ukraine, which stands to lose its last lever of influence on Russia as soon as the transit is discontinued, the expert said.

Bochkarev concluded that various EU forces would do their best to put off the implementation of Nord Stream-2 until 2019, when Russia and Ukraine are to sign a new gas transit agreement. “The talks will be very difficult both for Gazprom and for the Russian government, and this is exactly what the signatories of the letter to the European Commission hope to achieve,” he said.