Nord Stream 2 will remain a thorn in Poland’s and Ukraine’s relationship with the West

Nord Stream 2 is not designed to meet a shortage of gas supply in Europe but to redirect volumes already flowing in Europe’s pipelines in line with Russia’s interests. Moscow’s primary goal is to bypass Ukraine. Nord Stream 2 is undoubtedly in breach of the principle of energy solidarity on a fundamental level. The project has brought significant political benefits to Russia. Moscow knew that the pipeline would divide European countries, but it did not expect to receive the bonus of strained relations between the United States and its European allies. Ewa Mrowiec talks to Szymon Kardas, Ph.D., chief specialist in the Russian Department of the Centre for Eastern Studies.

The US has issued a joint statement with Germany, giving the green light to the completion of Nord Stream 2. Why has the US changed its policy towards this project?

Following the presidency of Donald Trump, the Joe Biden administration has made it a priority to reinforce transatlantic relations with Western Europe after Trump’s difficult and conflict-ridden term. Unfortunately, at the level of tangible action, the Americans have decided that in order to improve relations with Germany, a compromise must be accepted to complete the Nord Stream 2 project. However, it seems that Washington could have attempted to strike a more favourable deal with Berlin. If part of this is agreeing to the launch of Nord Stream 2 in exchange for very vague German political declarations, then Berlin will pay a low price for American permission.

Naturally, the actions of Joe Biden’s administration will be judged in different ways. Washington’s current position will be appreciated in Berlin and Vienna, perhaps also in Paris, and will certainly be very much criticised in Warsaw, Kiev or Vilnius. Nord Stream 2 has delivered significant political benefits to Russia. Russia knew that the pipeline would divide European countries, but it did not expect to receive the bonus of strained relations between the United States and its European allies. Moscow wins regardless of whether the crack in transatlantic relations is between Washington and Berlin (as under Trump) or between Washington and Warsaw and Washington and Kiev. Nord Stream 2 will remain a permanent thorn in Poland’s and Ukraine’s relationship with the West.

So is this the end of Ukrainian and Polish hopes of stopping this project?

The construction of Nord Stream 2 will be completed. American sanctions halted it for a year but were unable to block it when the Russians – despite their ships being placed on US sanctions lists – undertook to restart the work on their own. There are only 37 km of pipes to be laid, so meeting the August deadline is realistic. However, putting the gas pipeline into operation is a whole separate issue. Transporting gas along the seabed of the Baltic Sea requires not only the physical completion of construction work but also testing work, which usually takes several months.

Even more important is the certification of this gas pipeline, meaning confirmation that the infrastructure is safe to operate and meets the technical requirements set at the start of the investment. Significantly, US sanctions have recently expanded the list of entities at sanction risk to include companies providing certification services. However, the Berlin-Washington agreement probably also covers this issue.

Russian gas is already flowing at the bottom of the Baltic Sea from Russia to Germany via Nord Stream 1. Why is the construction of a second gas pipeline so politically controversial?

Firstly, this is yet another Russian initiative to pursue important objectives of Russia’s external energy policy. Moscow is working to create alternative transport routes to drastically reduce or even shut down the existing transit of Russian gas through third countries. Nord Stream 2 is not designed to meet a shortage of gas supply in Europe but to redirect volumes already flowing in Europe’s pipelines in line with Russia’s interests.

Moscow’s primary goal is to bypass Ukraine. That was the reason for building Nord Stream 1, Nord Stream 2 or Turk Stream (the Black Sea route) gas pipelines. Thanks to the new gas pipelines, Russia is gaining an instrument of political leverage in negotiations with Kiev and potentially also with Poland. We are also one of the countries through which Russian gas is transported in the Yamal Europe gas pipeline. One Nord Stream would not allow bypassing Ukraine as a transit route, but two make it possible.

Moreover, this project was announced in 2015, that is shortly after the annexation of Crimea and the aggression in eastern Ukraine. It seemed that no strategic project of an EU country with Russia was possible under such circumstances, and yet – despite the rhetorical condemnation of Russian policy towards Ukraine and the introduction of personal and sectoral sanctions – some European countries and companies have engaged in this strategic energy project with Russia, which will bring political and economic benefits to the latter.

Both at the level of EU Member States and the level of the EU institutions and officials, there is no unanimity regarding Nord Stream 2. So does the implementation of this project prove that the EU’s principle of energy solidarity is fictitious?

Nord Stream 2 is undoubtedly a project that fundamentally breaches the principle of energy solidarity. Numerous EU documents point out that both Member States and EU institutions should speak with one voice and take into account different internal interests when conducting external energy policy. Yet, on the one hand, this gas pipeline is supported by Germany and Austria, and partly even by France and the Netherlands (a French and a Dutch-British company are involved in it), and on the other hand, there is a wide range of opponents, among whom Poland and the Baltic States take the most radical stance.

The Court of Justice of the European Union issued a ruling in July on the OPAL gas pipeline, in which it stressed that the principle of energy solidarity is not an empty political postulate and is not declarative, but a principle of law enshrined in the Treaty on the Functioning of the European Union. However, the implementation of this principle in practice is problematic. The European Parliament has adopted resolutions strongly condemning the construction of the gas pipeline but, although this has had political significance, it has not translated into real action.

However, it should be emphasised that the European Commission, which is the guardian of the EU treaties, was given an additional tool during the construction of the Russian-German gas pipeline in the form of an amended gas directive introducing restrictions on the level of operation of the pipeline. Opponents of this investment must do everything in their power to ensure that the European Commission treats Nord Stream 2 without leniency, in accordance with regulations under EU law, and thus, for example, restricts its full exploitation.

There are currently several lawsuits pending in EU and German courts directly or indirectly related to Nord Stream 2. Could they pose a significant obstacle to the start-up and operation of the pipeline? Can European law really work in favour of opponents of the gas pipeline?

The constructors of Nord Stream 2 are trying to limit the severity of EU law or circumvent it because they have an interest in the rapid start-up and large-scale operation of the pipeline. The amended Gas Directive strengthens the position of the European Commission, but unfortunately, it has one major weakness. It contains a provision limiting the geographical scope of its application to that part of cross-border infrastructure located in the territorial sea of an EU country. This means that only about 4% of the Nord Stream 2 pipeline is covered, which is the section that has been laid in German waters. This could potentially lead to the gas pipeline being divided into two sections. The 4% would be managed by a company independent of Gazprom and the tariffs on this section would meet the requirements of European law, however, the remaining 96% would not be operated in accordance with the Gas Directive. The European Commission should try to oppose such a solution.

Although European law imposes restrictions on the exploitation of the gas pipeline, opponents of the project must remain vigilant, as Russia, Gazprom and the Western European partners in the project will not relent in their efforts to make full use of the new pipeline. The company Nord Stream 2 AG very quickly started the procedure in Germany to apply for an exemption of the Nord Stream 2 pipeline from the principles of the Gas Directive as implemented in the German legal order.

In May 2020, the German regulator did not grant this request, pointing out that the pipeline did not meet the basic premise – it was not fully completed, which was a condition for applying for an exemption. However, the Russians contested this decision before the court in Düsseldorf. A hearing in the case was held at the end of June and a judgment is expected at the end of August. The fight over Nord Stream 2 will therefore continue at the legal level.

The European Union is beginning to implement the European Green Deal, and gas is to be only a transitional fuel. With the development of renewable energy, is Nord Stream 2 as a gas pipeline still such an important political and economic project?

In the long perspective, the principles of the European Green Deal pose specific challenges for Russia. If the European Union’s aim is to achieve climate neutrality by 2050, and fossil fuels are to be only a transitional resource, this is bad news for all natural gas exporters to the European market. The question arises, however, regarding the pace of implementation of these very ambitious plans and, above all, of the medium-term objectives.

I get the impression that the Russian side does not believe that the European Union’s comprehensive energy transition plan will succeed within the timeframe envisaged. The Russians assume that gas as a fuel can serve the countries of the Community not only in the next decade but also in the following years. Investments such as Nord Stream and Turk Stream show that Europe is a strategic market for Russia.

However, to respond to the European Green Deal project, the Russians are sending signals that they are ready to respond to the needs associated with the development of hydrogen energy. Significantly, however, the transmission infrastructure of the Nord Stream 2 pipeline cannot be used for exporting hydrogen, but only for exporting a mixture that includes hydrogen. There are different estimates, but I am inclined to think that hydrogen could make up max. 5-10% of the mixture.

Polish version is available here.