Polish Attack on Nord Stream May Be a Sign of Brussels-Berlin Rift on Russian Gas

Poland’s anti-monopoly regulator UOKiK on July 22 deemed anti-competitive the tentative Nord Stream 2 pipeline, planned by a consortium of European companies.

According to Valdai Club contributor Danila Bochkarev, this decision is tied to the European Commission’s desire to slow down the project’s implementation and preserve the transit of Russian gas through Ukraine after 2019, the year when the current contract between Gazprom and the Ukrainian gas monopoly Naftogaz comes to lapse.

“The main goal of these actions is not so much to stop Nord Stream 2, which is likely impossible, as it is to delay the first line’s completion until after 2019. That is, to force Gazprom into signing a new transit contract with Ukraine. This would greatly change the entire energy landscape,” said Bochkarev, fellow at the Brussels-based EastWest Institute, focusing on economic security issues.

“This needs to be done as soon as possible. If the pipeline were completed before the Ukraine contract lapses, it would have completely different volumes written into the contract. Gazprom is being pressured by the European Commission to maintain transit through Ukraine, and at the same time the exact volumes wanted are not being named,” he added.

Poland does have some economic concerns regarding the new project, Bochkarev believes.

“They are concerned that transit through the Yamal-Europe pipeline will be reduced, although personally, I don’t think that there are any reasons for that to happen. When it comes to limiting competition, that is a pretty contrived allegation: gas already enters Poland from different directions, not only from Russia,” Bochkarev said.

According to Bochkarev, much more important is the European Commission’s stance, which is that preserving transit through Ukraine is crucial for both economic and political reasons.

“Poland is too small and insignificant to push through such initiatives on its own. I think the European Commission is behind this, for several reasons. First, transit gives it certain leverage over Russia, and additional expenses for the latter. Second, if the pipeline in Ukraine is not used in full capacity, it is not clear how pressure in it will be maintained. If Russian transit is shut off, there will be problems with gas delivery for Ukrainian industries. The country’s entire natural gas transportation system will have to be modified. Ukraine will lose money and influence, it will need additional investments at a time when international loans, primarily European ones, account for a third of its national budget expenses,” Bochkarev said.

The Polish protest came as a reminder of disagreements between the European Commission and Germany regarding energy cooperation with Russia, the expert believes.

“The project has the public support of not only shareholders, but also the German government. Vice-Chancellor Sigmar Gabriel has repeatedly expressed support for Nord Stream 2,” Bochkarev said.

“In Germany, a consensus formed long ago that a new gas pipeline needs to be built, so they were aggravated by the Polish government’s actions. Note that as it was building the LNG terminal in Swinoujscie, Poland did not consult with Germany, although it could have,” he said.

The Swinoujscie LNG terminal on Poland’s Baltic coast, not far from the border with Germany, was opened in October 2015. It is designed to store liquefied natural gas from Qatar. According to the Polish government, this allowed the country to reach its strategic goal of independence from a single natural gas supplier.

Although the Polish regulator’s decision creates some difficulties for the project, Nord Stream 2 will most likely be completed, according to Bochkarev.

“This decision slows down the project’s implementation, but, in principle, it could be challenged. I think that Nord Stream 2 will be built, although it is obvious that there is some sabotage going on,” Bochkarev concluded.

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