Russias Nord Stream 2 pipeline should not be built
WARSAW — The Nord Stream 2 pipeline is a bad deal for the European Union and a bad deal for Ukraine, and it should not go ahead.
The EUs focus should be on the desirability of the project, but the recent debate is much more about accommodating the controversial pipeline running from Russia to Germany under the Baltic Sea.
Talk is now focused on the fate of the existing Ukrainian gas transit route after 2019, when the current transit agreement with Russia expires and Nord Stream 2 is scheduled to go online. This comes as German Chancellor Angela Merkel recently acknowledged the importance of keeping gas flowing across Ukraine and of the pipeline projects political dimension.
But we should not let the debate on Nord Stream 2 shift into simply haggling over a certain level of transit that would make it acceptable for the EU to accept the project. Once Nord Stream 2 is open and Gazprom has the technical capacity to serve its Western European customers without the Ukrainian transmission system, any deal of the sort will be based solely on Russias good will, which is hardly an ironclad guarantee.
Supporting Ukrainian independence and helping with its reform process is crucial to the stability of our Continent. Maintaining the Ukrainian transit route after 2019 is certainly paramount to that objective. Cutting it off would mean a harsh blow to the Ukrainian budget, as transit fees account for about 3 percent of GDP. Even more importantly, if Russia can cut off supplies to Ukraine without halting transit to Western Europe, Kievs geopolitical situation would become much more vulnerable.
Even if the pipeline would appear to benefit Germany and Russia in the short term, Europe as a whole will eventually lose, and the ultimate winner will turn out to be Russia.
That is why Poland supports EU involvement in trilateral negotiations with Ukraine and Russia on the issue. However, merely engaging in talks isnt enough.
For Russia, circumventing Ukraine is the main geopolitical rationale behind Nord Stream 2. It is highly unlikely Moscow would give up that goal once the pipeline is in place. Maintaining a significant amount of gas transmitted via Ukraine could, and should, be agreed in trilateral talks — but blindly trusting that Gazprom will fulfill its commitments would be naive.
Russia, unfortunately, has a long record of ignoring its own declarations and obligations, especially when it comes to Ukraine. This was obvious in Russias annexation of Crimea — a fundamental breach of international order, as well as a violation of Russian assurances included in the 1994 Budapest Memorandum — and its aggression in eastern Ukraine in 2014. There was also the minor but telling case in March in which Russia moved to terminate gas contracts and halt pre-paid shipments to Ukraine after an unfavorable ruling against Gazprom by the Stockholm Arbitration Court.
The negative impact of Nord Stream 2 is not limited to Ukraine. The pipeline will also have political and economic effects on the EU, aggravating our dependency on Russia and leading to a quasi-monopoly of a single route of supply. Moreover, an increased level of market concentration in Germany will negatively affect other markets, especially in Central and Eastern Europe.
Author Konrad Szymański is the Polish secretary of state for European affairs | Olivier Hoslet/EPA
EU energy policy calls for a fully functioning wholesale gas market based on competition among European gas hubs. Nord Stream 2 would make it easier for Gazprom to resort to discriminatory pricing and other anti-competitive practices, something it has done repeatedly in the past, as proven by the Commissions antitrust investigation. In the worst-case scenario, Russia could even to cut off supply to some countries.
Liberalized energy market rules that allow for the free flow of gas within the EU can help, but the physical transportation of sufficient amounts of fuel eastward could prove physically impossible. It also assumes there would be enough gas in Western markets to send it by reverse flow back to Central Europe, which would be fully dependent on Gazprom once Nord Stream 2 is built.
That is why Poland firmly believes that Nord Stream 2 should not move forward. Instead, we should work on addressing Gazproms unfair commercial practices. Unfortunately, it now appears that the Commissions ongoing antitrust proceeding may end with no fine and no meaningful concession on Gazproms side.
One of the most pressing issues is the timely adoption of an amended gas directive, which would clarify that EU rules apply to all gas pipelines — not only those between EU members, but also from third countries. This is necessary to ensure adequate competition and security of supply. If we are not able to apply our own rules to Nord Stream 2, a project that is detrimental to our market and evidently harmful to our important partner Ukraine, our credibility as the Union will be gravely undermined.
In a dynamically changing international environment, we are spending billions of euros from EU and national budgets on increasing our energy security. But if we allow Nord Stream 2 to increase Gazproms dominant position, all our efforts will be in vain.
Even if the pipeline would appear to benefit Germany and Russia in the short term, Europe as a whole will eventually lose, and the ultimate winner will turn out to be Russia.
Konrad Szymański is the secretary of state for European affairs at the Ministry of Foreign Affairs of the Republic of Poland.
This article is part of POLITICOs new coverage of competition, antitrust and state aid issues, Competition Pro. This coverage includes the Fair Play newsletter every Monday morning. [email protected] to request a complimentary trial.
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