For a long time, the Russian gas pipeline has been facing an obstacle named Denmark. This country did not allow Gazprom to construct the Nord Stream 2 in its waters. Two years later, the Danish Energy Agency nevertheless gave the green light to the construction. This situation could not be called beneficial for Ukraine. How about Europe? Nord Stream 2 is rather a controversial issue. For example, how would this affect trilateral gas transit negotiations in Brussels? Or why the US, which voiced an idea of sanctions against the pipeline, is silent now?
Nord Stream 2 is…
This is the main gas pipeline that should connect Russia with Germany along the bottom of the Baltic Sea. The length of the route is more than 1200 km (2400 km along two lines), the pipeline’s capacity would be 55 billion cubic meters of gas per year. The project cost is 9.5 billion euros.
Nord Stream 2 belongs to Gazprom, but is partially funded by five European companies: the English-Dutch Shell, the German Wintershall and Uniper, the French Engie, and the Austrian OMV. The pipeline passes through exclusive economic zones and territorial waters of five countries: Germany, Denmark, Russia, Finland, and Sweden.
It is an extension of the Nord Stream project, an existing gas pipeline between the Russian Federation and Germany, which also runs along the bottom of the Baltic Sea. Both projects will be almost the same terms of capacity and length. The only difference is shareholders and the entry point into the Baltic Sea.
In 2018, Germany, Finland, and Sweden allowed Russia laying a pipeline through their territory. Denmark did not allow until the last.
Who opposes construction
Ukraine, Poland, Slovakia, Estonia, Latvia, Lithuania, Denmark, Romania, USA. All these countries consider the gas pipeline under construction a threat to Europe’s energy security.
"Nord Stream 2 is unacceptable and carries threats to the whole of Europe," Ukrainian President Zelensky has repeatedly noted. Slovakia shares the position of Ukraine.
Prime Minister of Poland Mateusz Morawiecki made a similar statement: “Nord Stream 2 is a very dangerous project for this part of Europe.”
Latvia and Lithuania jointly stated that they did not approve the project, calling it political. Estonia agrees with them. In turn, Romania believes that Nord Stream 2 makes "our allies and partners" energy-dependent on Russia.
The US also believes that the Russian project may have a negative impact on the independence of the States and European countries.
US President Donald Trump has repeatedly threatened European companies involved in the construction of Nord Stream 2 with sanctions.
In the chronological sequence, the US standoff against the Russian project looked like this:
- At the beginning of this year, US Ambassador to Germany Richard Grenell threatened German companies with sanctions for participation in Nord Stream 2. He sent them appropriate warning letters.
- A few months later, US Secretary of Energy Rick Perry announced sanctions against the project.
- In July, the US Senate Foreign Relations Committee voted in favor of a bill to impose sanctions on companies and individuals involved in the construction of gas pipeline. For the bill to take effect, it is necessary to receive approval by the House of Representatives and the US Senate, as well as that of Trump.
- In October, it became known that the US Congress Senator Andrew Barr has prepared a draft law on the energy security of Europe, providing for the imposition of new sanctions against companies involved in the Nord Stream 2 construction.
That's all. We can observe the process that brings the US closer to imposing sanctions on the project, but there are no results so far. And this is not encouraging, given the latest news from Denmark.
Copenhagen allowed it
According to Gazprom's plans, the construction of the pipeline was supposed to be completed by the end of 2019. But the process was delayed due to the lack of permission to lay the pipeline through Danish territorial waters. According to the official version, Denmark was studying the possible impact of the new pipeline on the environment.
In the event of failure, Russia could lay a pipe along a different route, but this would lead to an increase in the time and cost of construction.
The situation turned abruptly on October 30, when it became known that the Danish Energy Agency had granted permission to lay the Nord Stream 2 pipes. Moscow has been waiting for this for two years.
The permit was issued in accordance with the law on the continental shelf and on the basis of Denmark's obligations under the UN Convention on the Law of the Sea. However, according to the legislation of the country, the laying of pipes cannot begin before the permission takes effect. Besides, within a month, the parties have the opportunity to appeal against it.
In Ukraine, the resolution was called "expected." “Denmark’s principled position delayed the project for some time, but geopolitical weapons cannot be stopped with instruments that regulate exclusively trade relations,” said Andriy Kobolev, the head of Naftogaz-Ukraine.
Consequences for Ukraine
Firstly, this gives Russia an additional “trump card” in trilateral negotiations on a contract for gas transit through Ukraine to Europe.
As you know, the Russian Federation supports extending the still valid agreement for a year, while Ukraine wants to sign a long-term contract. Now that Gazprom has been instructed to continue construction and will soon be able to launch Nord Stream 2, the chances that the Russian Federation will agree to a long-term contract are practically zero.
Secondly, in the case of the launch of two pipelines with a total capacity of 55 billion cubic meters per yearm Ukraine will lose $ 2-3 billion in revenue, which is almost 3% of its GDP.
When Nord Stream 2 will be completed?
Even before the Danish permission was received, Gazprom CEO Alexei Miller said that it would take five weeks to build the Danish section of Nord Stream-2. "Actually, the work itself in the Danish sector is a maximum of five weeks," he said.
After the Copenhagen authorities "gave the start", the projected completion dates did not change. "The length of the site is 147 km. These works can be completed in five weeks," Miller said. However, he admitted that "there will still be preparatory work."
“In any case, the operator company is determined to fulfill all the planned work on the Nord Stream - 2 project on time,” Miller added. "On time", as is known, is until the end of 2019.
In a commentary for RBC news agency, the representative of Gazprom Sergey Kupriyanov said that Nord Stream 2 could lay the pipe before the end of the year, but it would still take time to pump gas and connect the pipeline. According to him, this may take the entire first quarter of 2020.
Fitch's senior director of corporate affairs Dmitry Marinchenko says that Nord Stream 2 will not start operating at full capacity until early 2021, when the receiving facilities in Europe will be fully completed.
As of October 30, more than 2,100 km of two pipelines were laid, Nord Stream 2 AG reports. Pipe laying has already been completed in the waters of the Russian Federation, Finland and Sweden, as well as mostly in the waters of Germany.
Can the process still be stopped?
The project of the Russian Gazprom can only be stopped by the sanctions of Western states, - at least as head of Naftogaz Andriy Kobolev puts it.
Prior to this, Prime Minister of Ukraine Oleksiy Goncharuk called on the head of the Estonian MFA Urmas Reinsalu to counteract Nord Stream 2, for example through coordinated actions of the EU and NATO countries.
It is also known that the Polish antimonopoly regulator fined Gazprom partner for USD 44 million, as the company was involved in the construction of the Nord Stream 2 pipeline.
We can only assume how these events will prevent the Russian Federation from completing the almost completed construction of the gas pipeline to the end, - or hope for sanctions.