NORD STREAM IN THE PROCESS
Thursday's summit of European Union leaders will elevate to the highest political level a fight over a new Russian natural-gas pipeline that is supported by Germany but strongly opposed by the U.S., which fears could further undermine Ukraine's financial and political stability.
The dispute over the planned expansion of OAO Gazprom's Nord Stream pipeline, dubbed Nord Stream 2, has been simmering below the surface for months, especially since German Economy Minister Sigmar Gabriel promised to protect the project from "political meddling."
The talks will put the bloc's commitment to easing Moscow's grip over its eastern members and neighbors to a test. German Chancellor Angela Merkel will likely be pressed to voice her views on the pipeline.
"We want to be heard and we hope this message will be taken on, especially by the chancellor," a Slovak diplomat said Wednesday. Slovakia is one of seven Central and Eastern European states that raised concerns over Nord Stream 2 in a recent letter to the European Commission, the EU's executive arm. The diplomat said these countries expected backing at the summit also from Italy and Spain, two of the bloc's largest members.
Nord Stream 2 would ship an extra 55 billion cubic meters of gas a year to northern Germany through the Baltic Sea, doubling the capacity of the existing Nord Stream pipeline. The additional volumes are roughly what Gazprom has been piping to the EU through Ukraine, raising concerns that the new route would allow Russia to strip Kiev of much of its remaining economic leverage and an important source of income.
"All I see is an overarching political agenda to get rid of Ukraine as a transit country at all cost, no matter what the financial cost is," Amos Hochstein, the U.S. special envoy for international energy affairs, said in an interview.
"For a country that is facing a Russian aggression militarily in the east, I would be very concerned that this is an attempt to undermine the economic stability of the country in nonmilitary means," he said. Ukraine, which had to restructure its debts earlier this year and has been depending on a bailout from the International Monetary Fund and the EU, gets around $2 billion a year in transit fees from Gazprom.
During a visit to Brussels on Wednesday, Ukrainian President Petro Poroshenko warned that support in the EU for Nord Stream 2 could hurt the bloc's relationship with Kiev and its energy security. "Nord Stream 2 is our greatest concern as of today," he said.
Gazprom and the other shareholders of Nord Stream 2—Anglo-Dutch oil and gas company Royal Dutch Shell PLC, Germany's E.ON AG and BASF AG, Austria's OMV AG and France-based Engie SA each hold a 10% stake—all say there are clear economic motives for building the pipeline.
Ulrich Lissek, a spokesman for Nord Stream 2, said the consortium believes falling production in Norway, the U.K. and Germany along with increased use of gas to compensate for irregular energy production from renewable sources will create an annual import gap between 140 billion and 150 billion cubic meters over the coming decades. That would allow the new pipeline and the existing routes via Ukraine to be used in parallel.
The European Commission disputes these estimates. "We don't expect huge increases in consumption in our future to justify such a doubling of the capacity," the bloc's climate and energy commissioner, Miguel Arias Cañete, told The Wall Street Journal. Mr. Cañete said the commission would ensure Nord Stream 2 was in line with EU legislation, which blocks companies from controlling both a pipeline and its supply.
But the EU executive may struggle to prevent the project. Last month, Gazprom reduced its stake in Nord Stream 2 to 50% from 51%. And Germany's Mr. Gabriel has said he would work to keep the approval process in the hands of Berlin and regional authorities.
"What's most important as far as legal issues are concerned is that we strive to ensure that all this remains under the competence of the German authorities, if possible," Mr. Gabriel told Russian President Vladimir Putin at a visit to Moscow in October, according to a transcript published by the Kremlin.
A spokesman for Germany's economy ministry said the planning for Nord Stream 2 was still in its early stages, but that the project would have to comply with EU laws should it go ahead. "It is clear that Ukraine should remain relevant as a transit country in the coming years," the spokesman added.
This struggle over competencies has raised broader questions on whether EU institutions are properly equipped to protect the bloc's energy security in the face of national and commercial interests. Mr. Cañete said he learned about the expansion of Nord Stream from news reports, and is now considering new rules that would require companies to notify the commission of projects that could harm the security of energy supply in the EU.
"We're in the process of thinking," he said. "There's no fixed conclusion yet."
An earlier attempt to give the commission more power to scrutinize commercial contracts of energy companies was shut down by EU leaders at a summit in March.
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