Why stopping Nord Stream 2 is beneficial for Poland

Author : Max Herder

Source : WirtschaftsWoche

In opposition to the second Nord Stream two factors united: on the one hand, the traditional dislike of the Poles for Russia, and on the other, their own economic interests
15:37, 21 September 2020

The construction of Nord Stream 2
Nord Stream 2

The satisfaction of the Polish representatives was clearly noticed. This country has been criticizing the second Nord Stream for many years, calling it "directed against Europe" and "an instrument of blackmail" and claiming that every kilometer of this pipeline is laid in a completely wrong direction. Now, after the poisoning of Russian opposition leader Alexei Navalny, Polish Prime Minister Mateusz Morawiecki is completely confident that he is right. According to him, the assassination attempt on Navalny confirmed that Russia cannot be considered a reliable partner, and therefore Germany and the EU should finally stop the construction of the gas pipeline. “You cannot threaten Russia from afar and at the same time participate in the Nord Stream 2 project together with Gazprom,” Moravetsky wrote in an article for the Frankfurter Allgemeine Zeitung newspaper.

Free yourself from the shackles

However, the Polish prime minister preferred to remain silent about something: the halt in the construction of the controversial gas pipeline, first of all, would benefit his own country. The fact is that Germany's eastern neighbor is striving to occupy an important place in the new energy market in Eastern Europe by building its own gas pipeline jointly with Denmark for this purpose. In opposition to the second Nord Stream two factors united: on the one hand, the traditional dislike of the Poles for Russia, and on the other, their own economic interests. Added to this is a new revision and tightening of energy and climate policies by Brussels.

The construction of the Baltic Pipeline should be completed by the end of 2022, and it is planned to start delivering gas from Norway through Denmark to Poland. This 900-kilometer gas pipeline, according to Warsaw, will mean getting rid of the "Russian fetters" in gas supplies, not only for itself, but also for its European neighbors.

According to the Poles, countries such as Slovakia, the Czech Republic, Ukraine and even Germany could receive "blue fuel" not from Russia, but from Poland via this gas pipeline - especially in the absence of the Nord Stream 2 pipeline with cheap Russian gas.

After the assassination attempt on the critic of the Kremlin Navalny, the option of closing the Nord Stream 2 project is not ruled out, in particular, by German Chancellor Angela Merkel and her Foreign Minister Heiko Maas. This week, when new laboratory results were published confirming the assassination attempt with a poisonous substance, Berlin once again tightened its tone - and this despite the fact that the federal government has always supported the project in principle.

The prospect of completion of the pipeline is more threatened than ever before, whether Berlin and the EU agree to "bury" the multibillion-dollar project or not. The fact is that at the end of 2019, the United States imposed extraterritorial sanctions against companies directly involved in construction. Immediately afterwards, the Swiss company Allseas, which owns the pipe-laying vessels, recalled them from the Baltic Sea. A Russian specialized vessel with the potential to complete construction is in port on the island of Rügen, but needs additional equipment. About 150 kilometers of the pipeline remain to be completed.

In addition, a few weeks ago, a group of US senators wrote a letter to the management of the port of Sassnitz on Rügen in which they threatened them with "financial destruction" if they participated in the construction of the pipeline.

Brussels supports the project

All this is good news for Warsaw, which has traditionally been a loyal partner of Washington. About two years ago, Denmark and Poland agreed to build the Baltic Pipeline, which will be a branch of the already existing Europipe II, which supplies Norwegian gas to Germany via the North Sea. The Baltic Pipeline is supposed to be connected to Europipe II west of Denmark in the North Sea, and then to lay through the land of Denmark into the Baltic Sea and further to Poland itself. The construction work, according to experts, will cost two billion euros, which Poland and Denmark will share among themselves.

The EU is supporting this project with € 215 million. Last year, when the European Commission agreed to financially participate, Morawiecki personally went to Brussels and called it a "strategic breakthrough."

The European Commission supports the project because it brings together several countries. For Poland, the Baltic Pipeline is also part of a strategy to transform itself into a distribution center for liquefied gas from the United States. LNG, which currently costs more than Russian pipeline gas, is also expected to be sent to the Swedish and Danish markets in the future. We have to admit that here, too, the "energetic egoism" rules, in which some people so like to reproach Germany - despite all the rhetoric that asserts the opposite.

Industry insiders say the European Commission is "very supportive" of Poland's intentions. Warsaw cites as an argument the fact that Nord Stream 2 was built bypassing Ukraine, however, keeping silent that the Baltic Pipeline is supposed to be built bypassing Germany.

Related: German Bundestag could not vote for draft resolution on Nord Stream 2

"We cannot afford to split Europe over energy policy," said Timon Gremmels, a German energy expert who supports Nord Stream 2. Like many of his SPD colleagues, he does not want Germany to punish Russia for the assassination attempt on Navalny by closing the project. "Despite all the criticism, Germany has always stood for a single European line and insisted on continuing gas transit through the territory of Ukraine," the Bundestag member stressed. According to him, the new "gas directive" of the EU was supported by 27 countries, so there is no need to talk about any "special German way". Europe's plans also have a right to exist if they are in line with the European strategy to diversify energy sources, Gremmels added.

When Jean-Claude Juncker was at the head of the European Commission, Brussels reacted positively to Warsaw's arguments - after all, it was a good opportunity to let the countries of Central and Eastern Europe understand that the EU was listening to them, especially at a time when this part of the European Union was faced with an influx of migrants and felt thrown in trouble by Brussels. "There is a contradiction: on the one hand, the European Commission accuses Poland of violating legal norms, and on the other hand, asks Poland so few questions on energy policy issues," said one industry representative.

Questionable arguments

But Poland and Denmark do not care much about this. The construction is carried out by the Danish gas concern Energinet, the Polish state-owned energy giant PGNiG, and the Polish pipeline operator Gaz-System. In May, they received all the necessary permits. The Danes have already begun construction work on their land area.

The Poles are touting the project, arguing that it will be a new stable source of gas supplies. At the moment, they account for the largest carbon dioxide emissions into the atmosphere of all EU countries, as Warsaw continues to focus on coal as an energy source. And it is not necessary to say that Norwegian gas, which will be supplied through the North Sea, will be a more preferable option than Russian, in terms of improving the climate balance.

Doubts are also raised by Poland's assertions that the prices for gas from the Baltic Pipeline will be lower for all European countries, because its availability will mean tougher competition in the market. The point is that Norwegian gas is expensive. If Russian gas supplies to Europe in the future are reduced in the event of the refusal of the second Nord Stream, then the supply will also decrease, and one will not have to rely on low prices for gas from the Baltic Pipeline.

For the Poles, this project is much more an important means of gaining the much-desired energy independence from Russia, and it doesn't matter to them what the price is. At the moment, Russia accounts for over 40% of all gas supplies to the EU. In Poland, this figure is 60% at all - nine billion cubic meters of gas.

Business? With pleasure!

For several years now, Warsaw has been in dispute with Moscow over supply agreements by the Russian state concern Gazprom, signed back in 1996. Reason: Poles want to pay less for "blue fuel". Eight years ago, PGNiG achieved its first price cut from Gazprom. Three years later, Poland applied to the Stockholm Arbitration and received another discount. In May of this year, the Poles completely terminated the supply contract with the Russians, which expired in 2022, that is, exactly when the construction of the Baltic Pipeline is supposed to be completed, through which ten billion cubic meters of gas a year will be supplied to Poland.

In Poland, Gazprom is at risk of losing its seventh-largest buyer. Nevertheless, despite harsh criticism of Russia, Poles continue to actively conduct other types of business with it. In May, for example, a long-term contract for the transit of Russian gas to Germany expired, and the parties entered into a new agreement in accordance with new European norms.

The volume of supplies is estimated at 33 billion cubic meters per year. The pipeline operator in Poland is Europol Gaz, a joint venture between the Polish concern PGNiG and Gazprom, each of which holds a 48% stake. The remaining 4% went to Gas Trading, a trading subsidiary of PGNiG. The fuel is sold by the Polish operator Gaz-Systems in accordance with the rules of the European internal market.

For Poland, a transit contract with the Russians is a lucrative business - even more profitable than under the old contract.

Basically, this is all you need to know about the categorical enmity that Poles have towards Russia.

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