[eng] EU-Russia: Nord Stream 2 and it's consequences.

Article published on Jan. 5, 2017
Article published on Jan. 5, 2017

This article has not been vetted by an editor at Paris HQ

(Republication) The EU-Russia partnership is in peril. Russia seeks is seeking to diversify its market and, while the Turkstream project has been supsended, the reconciliation between Putin and Erdogan could relance it and a deal with India signed in summer 2016. The EU, from ir's side, seeks to reinforce security and energy solidarity. Nevertheless  they are linked by the project Nord Stream 2.

In 2013, around 39% of gas importations came from Russia, 30% from Norway and 13% from Algeria; hence the EU's dependance on Russian importants. It is not, however, a one-sided dependence: Russian gas exports depend enormously on the European market. Accordingly, Russia seeks to extend its market, and turns therefore towards Asia. Europe bets on internal solidarity and importation of Liquified Natural Gas (LNG) as a way to diversify its sources of supply, and, moreover, strengthen its energy security. What is more, Europe decries Russia as an "unreliablie partner who uses energy supply as a political weapon." (European Parliament Resolution 15/12/2015). However, in this tense context, could Nord Steam 2 be an energy opportunity for Europe?

What Nord Stream 2 Offers to Europe

Formalized in September 2015, Nord Stream 2 is a pipeline which would double the flow of Russian gas directly to the German border, meanwhile limiting Ukranian transit. Scheduled to open in 2019 it's supposed it will follow the same route as  the Nord Stream 1 pipeline. Nord Stream 2 is a potential asset for all or Europe where it would secure access to competetively priced gas, diversifying the route, but not the sources, of supply to the European continent. Furthermore, this project would prove more than advantagious for Germany,  bringing gas directly to their door, and doubling the quantity of gas moved between Russia and Germany. To the detriment of tthe Ukraine and thc countries of  Central and Eastern Europe, Germany would become a decisive gas hub for Europe. The Germans are therefore, unsurprisingly, fervent defenders of the project, lauding the economic and commercial benefits to Europe (competetively priced gas, enhanced transparency and competition in the gas market).

A political rather than economic project

Although, according to Article 184 TFEU, the choice of energy provision remains in the hands of Member States, the European Commision recently has sought the right to scrutinize external agreements with third countries, (Press release of the European Parliament 13/13/2016) in order to verify the conformity of these agreements with European texts and the objectives of the Energy Union. This summer, the Commision ha been closely following Nord Stream 2 (Juncker). While some Member States have been reassured, this is not the case for all. Indeed, Poland, Slovakia, Hungary, Lithuania, Romaniaq, Latvia and Estonia sent a letter to the European Commision expressing their opposition to the the project at the outset. The loss of transit income was one of the main concerns expressed, in addition to the risk of increased dependence on Russia. Greece, Italy and Bulgsaria have also said they are "hostile to Nord Stream 2, taking away any prospect of developing an alternative gas corrider in Southen Europe" (MC Aouin, IFRI, 2016)/ This summer, the Polish competetion authority also expressed doubts about the legality of the proejcet and its consequences: a dominant postition of Gazprom in the domestic market and a restriction on competetion.

Beyond the economic aspect and the energy at stake in this project, it is mainly it's political scope that divides Europe. Indeed, it directly involves diplomatic and political relations between the EU, Russia and Ukraine. In 2015, 39% of European imports of Russian gas to Europe had crossed Ukraine. However, should  Nord Stream 2 emerge, it would bypass Ukraine, whose revenues linked to the transit of gas, consequently,  would drastically decline weakining it's economic stability. Ukranian energy security is also at risk because Russia could cut it's supply while preserving the European market. In addition, one of the objectives of the Energy Union is to support Ukraine through a strategic energy partnership. If Nord Stream 2 should be built, the latter point would surely be used asa  stab at the Commision, Juncker and their priorities. Moreover, as mentioned above, the project would have the effect of increasing the energy dependence of Germany and Austria on Russia, whilst equally we can underline the importance of Nord Stream 2 as decisive in Russian efforts to expand their energy market.

A project which reveals the limits of the Energy Union?

Nord Stream 2 is a direct attack on certain Energy Union objectives, either through bringing the Ukraine's energy security into play,  or vis-a-vis in augmenting dependence on Russia without, however, allowing diversification of supply sources. In spite of everything, the economic benefits are often given preference over political issues and other problems. In other words, it is highly likely that, in any case, Nord Stream 2 will emerge thus exposing one of the potential limitations of the Energy Union. On the other hand, the latter presupposes an energy solidarity between Member States, a solidarity that has already been tested by the gas crises of 2006 and 2009.

In a press release of 13th October 2016,  the European Parliament stressed it's willingness to put in place a "solidarity mechanism". If a Member State faced a gas shortage and the safety and health of it's customers was thereby at risk, it could ask a fellow Member State  for a gas transfer via "Supply Corridors". The resolution thus adopted envisaged cooperation and regional solidarity between EU Member States. MEPs, however, insist that this "solidarity mechanism" includes compensation in mitigation for the damages to implicated 

The project Nord Stream 2 thus reveals a deep division in Europe around the stakes of the gas market. On the one hand, Western Europe has at its disposal different sources of supply. On the other hand, Eastern Europe is appprehensive of an increased dependence on Russian gas and is seeking to secure its market and sources of revenue in order to have a certain margin of maneouver vis-a-vis Russia. While Nord Stream 2 is an opportunity for some, it does not necessarily meet the needs and interests of others. Moreover, the project is not without geopolitical problems even for the states of the West. Indeed, even if Germany puts pressue on Russia for its attacks in Syria, it seems limited in its opportunities to criticize the Russian position.

 This article was originally published on the website magazine Eyes on Europe.  

Although, according to Article 194 TFEU, the choice of energy mix remains in the hands of the Member States, the European Commission has recently sought to have a right of scrutiny over their external agreements with third countries, (Press release of the European Parliament 13/10/2016) in order to verify the conformity of these agreements with the European texts and objectives of the Energy Union. This summer, the Commission has followed closely Nord Stream 2 (Juncker). While some Member States have been reassured, this is not the case for all. Indeed, Poland, Slovakia, Hungary, Lithuania, Romania, Latvia and Estonia sent a letter to the European Commission expressing their opposition to the project from the outset. The loss of transit income was one of the main concerns expressed, in addition to a risk of increased dependence on Russia. Greece, Italy and Bulgaria have also said they are "hostile to Nord Stream 2, taking away any prospect of developing an alternative gas corridor in southern Europe" (MC Aouin, IFRI, 2016) . This summer, the Polish competition authority also expressed doubts about the legality of the project and its consequences: a dominant position of Gazprom in the domestic market and a restriction of competition.

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