Nord Stream 2 Pipeline: Who wins and who loses

The new EU gas directive was approved on April 15 after having passed the relevant procedure, European news agencies and the mass media informed. From now on all gas transmission lines from the countries that are not members of the European community have to meet requirements and rules that govern the EU’s internal gas market. This also concerns the gas pipeline from the Russian Federation to Germany bypassing Ukraine. The new directive makes it possible for Europe to maintain control over “GazProm” thereby depriving this Russian gas company the status of a monopolist.

However, an exception could be made from any rule. As it is the case with Germany that insists on making the final decision concerning the amendments to the gas directive with respect to Nord Stream 2. Of course, after consultations with the European Commission. In the opinion of experts, Berlin is in the position to protect gas transit against future limitations especially taking into account the position of Chancellor Angela Merkel on this case. The Chancellor repeatedly has stressed that contrary to problems that the Russian Federation creates to the entire world, its isolation is inadmissible. As for Nord Stream 2, its construction is of great importance for Germany.

It might happen that this gas transmission line or its part could be a subject to no rules at all. Or these rules would cover only the final 50 kilometers of the pipeline transferred to the daughter company. For instance, this part of the pipeline might be joined to the European gas transportation network at the point of its entering Germany. Also, it is quite possible that only this part of the pipeline would be ruled by the directive which means that “GazProm” will continue to be the only gas supplier in Europe.

There is also a probability that one more condition also could be circumvented, the condition which stipulates that an independent from “GazProm” company has to be an operator of Nord Stream 2.

Experts believe that the following condition could be a serious obstacle to Nord Stream 2 project if, for instance, 50 percent of the pipeline would be filled by independent suppliers. In this case it would be rather difficult for “GazProm” to meet this condition because the Russian Federation will not be able to find such number of suppliers. And as a result the gas transmission line could be rendered unprofitable.

Nevertheless the Russian gas monopolist can benefit from some amendments to the gas directive. For instance, a Deutsche Welle commentator notes that the directive regulations concerning transportation tariffs for the German section of the pipeline will be fixed by Berlin and Moscow by a mutual agreement. If such an agreement has not been reached, the German operator will establish tariffs only for its part of the gas line. Deutsche Welle also stresses that it is up to the owner to apply all the rules or just some of them, to conduct negotiations with Germany and the European Commission or to renounce the project altogether.

The new gas directive will take effect this summer – before Nord Stream 2 will be put into operation. Interesting is the fact that the directive does not cover another line of the Nord Stream that was put into commission within the years from 2011 to 2012. However, even the strictest conditions to Nord Stream 2 cannot stop its construction.

So, who will win and who will lose in the final analysis? It goes without saying that Russia will gain economically. First, it excludes from the process transit mediators. Second, it supplies carbohydrates to Europe directly. From the political standpoint, by a lucrative agreement with Germany, Moscow has caused a split in Europe having divided it into two camps which carry on endless disputes whether they need this gas pipeline or they don’t.

Germany will have its own benefits either. First of all, it will get gas at a reduced price. Then it will be able to dictate the price policy in Europe. As for Ukrainian interests, these are not on the agenda.

At the same time, gas experts claim that even with the new pipeline Russia still will need the services of the Ukrainian gas transportation system. The only point is what amounts of carbohydrates will pass through Ukraine. Regrettably, economic losses of Ukraine are considerable. Ukraine will be losing three billion dollars a year if Nord Stream 2 has been put into operation. As far as the loss of a political leverage is concerned, there is no point even to talk about that.
As of this February, Russia has laid more than 700 out of 1224 kilometers of pipes.