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Bloomberg
Jean-Claude Juncker and Vladimir Putin may offer clues about the way forward for a controversial project to expand Russia’s gas interconnections with Europe this week.
The European Commission president meets the Russian leader at a conference in St. Petersburg and may discuss ways a Gazprom PJSC-led consortium could be allowed to double the capacity of the Nord Stream pipeline which carries Russian natural gas to Germany.
The project has divided EU governments concerned about the bloc’s dependence on Russian gas and Putin’s meddling in Ukraine.
Eastern EU member states like Poland and Slovakia have pressured Juncker and EU President Donald Tusk to block Nord Stream 2 and Italy objects too, irritated that the EU stopped a Russian pipeline to southern Europe in 2014.
Officials are also concerned about causing further instability in Ukraine, roiled by a Russian-backed separatist movement since its 2014 revolution. About 40 percent of Russian gas exports to Europe are pumped through Ukraine and the cash-strapped government earns about $1.9 billion a year in transit fees.
“Nord Stream has become a poisonous political project,†said Judy Dempsey, a Berlin-based analyst at Carnegie Europe.
Russia, though, wants to improve access to the stable western market amid falling energy prices while Germany, the EU’s most powerful member, has a long-standing policy of cultivating ties with Moscow and would benefit from a more direct energy supply route with greater
capacity.
That power struggle is being played out as an argument about regulation.
Regulatory Barriers
Since the deal to construct the first Nord Stream pipeline was signed in 2005, the European Commission has introduced a new set of rules to promote competition, which mean that a gas provider is not allowed to control the pipelines.
Applying those rules strictly to all of Nord Stream 2 would be so complicated that it would probably kill the project.
Russia and Germany argue that those rules shouldn’t apply to the offshore part of the new 1,200-kilometer (750-mile) long pipeline, which would cross the territorial waters of four member states and Russia before reaching land in Chancellor Angela Merkel’s constituency of Greifswald on Germany’s Baltic coast. The European Commission has yet to decide on its position.