‘Nord Stream 2 will be extra capacity for Gazprom in 2020’

The leading analyst of the National Energy Security Fund on how the USA intends to shelve Gazprom via Nord Stream 2

‘Nord Stream 2 will be extra capacity for Gazprom in 2020’
Photo: angi.ru

Will the new sanctions of the USA undermine the construction of Nord Stream 2? It doesn’t seem so, Russian authorities claim it, and the nature of the sanctions implies the gas pipeline will be built. Leading analyst of the National Energy Security Fund, expert of Russian government’s Finance University Igor Yushkov explains to Realnoe Vremya that the true threat of the sanctions is different: instead of undermining the construction, the USA will scary potential clients of this project.

Now the USA is discussing tougher sanctions on Nord Stream 2, but it is unclear if this will happen, when it will happen and what sanctions exactly will be imposed. We see so far determination of the United States to impose new sanctions, but I think that Europeans will lobby their interests, while the Europeans want to at least have a chance to use Nord Stream 2. They had been successfully defeating American sanctions for quite a long time, but the internal fight between the Democrats and Republicans ultimately led to the adoption of these sanctions. This brought Allseas from Switzerland to withdraw its pipe layer.

What sanction options are called so far? Firstly, it is the imposition of a ban on gas pipeline maintenance. This, by the way, an illustrative moment too: it turns out that Americans believe that Russia can finish the construction of the gas pipeline on its own. But Russia in general can maintain the pipeline, at least Gazprom is the leader among Russian companies in import substitution — they have completely substituted pipes, they have equipment to troubleshoot a gas pipeline.

This situation requires that there be an independent gas pipeline operator, that’s to say, Gazprom must hand over the management of the pipeline to a company it doesn’t own. Photo: eurasianews.md

A more interesting issue is sanctions against companies that will buy gas coming through Nord Stream 2. There is a very delicate moment here: these sanctions can work if only Nord Stream 2 doesn’t receive exceptions of the norms of the Third Energy Package (Editor’s Note: anti-monopoly legislation operating since 2009 that particularly envisages the following: gas pipelines on the territory of the EU must belong not to those who produce and sell gas but independent companies). According to the German regulator, Nord Stream 2 isn’t excluded from these norms. A parcel within 12 miles from the shore of Germany meets the regulation’s norms.

This situation requires that there be an independent gas pipeline operator, that’s to say, Gazprom must hand over the management of the pipeline to a company it doesn’t own and Gazprom use only 50% of the capacity of this parcel. This is done to create competition (though there can’t be any competition on this parcel).

But Gazprom can pass this by: either to sell somebody half of the gas at the entrance to the gas pipeline or do it at the beginning of the 12-mile parcel. If Gazprom loaded itself a hundred per cent, while the point of transmission would be in Austria, it would be impossible to track who exactly buys gas via Nord Stream 2. Because besides Nord Stream 2, Austria has a line of Nord Stream 1 and the second line of TurkStream, and gas will be passing through Ukraine in the next five years. And it is impossible to understand who buys whose gas there and which gas went through Nord Stream 2.

Nord Stream 2 needs to be considered as a strategic project. Photo: kremlin.ru

If the Third Energy Package is in force and Gazprom will try to circumvent the restrictions in the above-mentioned way, then it will become clear whose gas will be in the pipe — the such-and-such company is European. And they can be imposed sanctions. And there will be an integrated approach here: on the one hand, the application of the European anti-monopoly legislation, which is used de facto as sanctions, and possible American restrictions. I think there is a risk in that. It is hard for me to say what else can be made up for Nord Stream 2.

It is logical for Gazprom to start working on Nord Stream 2 right now. The sea is calm in summer, and it can work as fast as possible. But it shouldn’t sit and wait for the Americans to impose restrictions and to put a spoke in our wheel.

We should add that Nord Stream 2 will be extra capacity for Gazprom in 2020. Gazprom already has a strict transit contract via Ukraine, there is a very strict condition “pump or pay”, this is why Gazprom has to load a lot. Given the low demand in the European market, Gazprom already has a surplus of capacities.

However, Nord Stream 2 needs to be considered as a strategic project. It must give Gazprom a chance to choose which route to use to supply gas to Europe. Ukraine at the moment is a transit point without alternative, Gazprom can’t meet contracts with Europeans without it.

By Aleksandr Artemyev