‘Nordstream – 2’. What will be the End of Fighting With no Rules?

In the middle of May a gigantic project ‘Nord Stream-2’ of the Russian gas pipeline suffered a knockdown. When the gas pipe that is being constructed almost reached territorial waters of Germany, the Federal Network Agency of…

In the middle of May a gigantic project ‘Nord Stream-2’ of the Russian gas pipeline suffered a knockdown. When the gas pipe that is being constructed almost reached territorial waters of Germany, the Federal Network Agency of the country refused to exempt ‘Nord Stream-2’ from application of Gas Directive of the European Union. This Directive that came into effect on 23 May last year inter alia provides for that a company that extracts gas cannot be the owner of the gas pipeline. Meanwhile, the Russian concern  is the sole shareholder of ‘Nord Stream-2’. Whereas the project was not completed until the mentioned directive came into effect, its implementation was close to failure.  
Then even an address of the pipeline operator  to the European court has not helped much. The court has dismissed the lawsuit of Nord Stream-2 and Nord Stream-2 AG regarding the decision of the German regulator and stated that the EU Directive had no direct impact on the interests of the gas pipeline operator.
It seemed that a knockdown turned into a knockout. However, a German regulator that stroke a knock-down effect to the Russian gas giant, nevertheless stretched its arm and made an exception from the main provisions of the EU Gas Directive for construction of a section of ‘Nord Stream-2’ in Germany and its territorial waters. This exception will allow Russia to continue works and allow the owner of gas pipeline  to exploit it for the coming 20 years. Now the project that most countries of Eastern Europe so much resisted to be implemented, could be buried unless Washington takes active steps.       
The changed position of the German regulator has not got a response neither in Russia nor European countries that resisted the project. In a completely different way than a previous decision of the Federal Network Agency and decision of the European Court. The latter caused discontent in , too. ‘I, as previously, am worried that normative preconditions of the project of such a big scale ‘Nordstream-2’ have been materially changed again when so little time is left until putting it into operation’, Klaus Ernst, Chairman of the Committee on Economics and Energy Affairs of the German Parliament told. According to him, such changes would devalue investments and would enable project operators to claim for damages. ‘I hope that ‘Nordstream-2’ will take legal actions against such a decision and I wish success to the company in the process of litigation’, the deputy added.     
Probably in Moscow they had no doubts that unfavourable decision of the German regulator is just a temporary and formal obstacle. We can make such a conclusion from a quite calm reaction of Sergey Lavrov, Minister of Foreign Affairs of Russia.  ‘I don’t think that the project can be suspended. I am sure that Germany and other European states, whose companies participate in implementation of the project, are interested in it. Finally, all Europe is interested in it, since it will improve its security of energy supply’, head of the Russian diplomacy told during the press conference after the meeting of ministers of the Board of the Baltic States. Besides, according to the not identified experts, S.Lavrov added that as a result of legal coalition that would arise in regards to the project, the version of a solution would make the price of Russian gas even higher to final users – citizens of the EU states. It suggests: once Europeans interfere with the project, it means like cutting off the branch you are sitting on.       
Maybe these words are right, however, they first of all are addressed to Germany, which consider ‘Nord Stream-2’ as a purely commercial project. However, a lot of other countries of the EU, including Lithuania, Latvia, Estonia, Poland and Denmark and also Ukraine and the USA first of all see a geopolitical dimension of the project, the main goal of which is to tear apart solidarity of Europe and make damage to Ukraine by exporting big volume of gas not through the territory of this country. Therefore Denmark, one of few EU states, that had almost an exceptional possibility to stop construction of the gas pipeline, was resisting in all ways possible.      
147 kilometres of the gas pipeline ‘Nord Stream-2’ run in the exceptional Danish economic zone of the Baltic Sea, that is located to the south of the island Bornholm that belongs to this country. Last year in summer, based on the mentioned EU Directive, Copenhagen did not give a permission for a long time for construction of a section of this line. However, in autumn the Danish Energy Agency issued such a permission, which removed the last obstacle for the gas line to be turned towards the shores of Germany.
To tell the truth, the conversation of project operators with Copenhagen has not been finished yet, however we can hardly expect any material changes in this part of the story. Still, in already mentioned press conference, S. Lavrov mentioned that ‘some information appeared that the government of Denmark is discussing a possibility to ask additional questions about the project’. However, it is most probable that Moscow is not expecting any obstacles of Copenhagen in regards to implementation of the project for Moscow. According to S. Lavrov, there are a lot of lawful options for solution of the situation. ‘We see that Denmark is not taking such a constructive position in aspects of the EU and NATO as other members of these organizations on various issues regarding relations with Russia. We do not make drama here and are ready to talk to everyone’, the Minister told.     
Thus, it is obvious that in Europe nobody can stop this ambitious project of Russia. The last option is left – new strict sanctions of Washington that have already demonstrated their efficiency. At the end of last year the Swiss offshore contractor  that performed works in laying the gas pipeline had to terminate operations as a result of sanctions introduced by the USA – its vessels designated for laying the pipeline left the Baltic Sea.  
Then Alexander Novak, Minister of Energy of Russia, was forced to admit that completion of the project had to be postponed, however Russia would be able to lay the gas pipeline alone. The same was repeated by President Vladimir Putin, who added that the project would be finished a few months later than planned. Now Russian vessel Academic Charsky that sailed to the territorial waters of Germany will continue performing works and which cannot be subject to international sanctions. Will such a step save the project? From the Russian reaction to threats of Washington to take new sanctions against the gas pipeline we can judge that further success of ‘Nord Stream-2’ is questionable.   
This was also supported by the statement of ‘Nord Stream-2’ operator at the end of May, which said that ‘a risk of introduction of any sanctions is an unlawful discrimination of European companies. We agree with the European Commission that extra-territorial sanctions violate the international law and that they would not determine politics and practice of the EU’, the statement of the company told.    
Such statement appeared after Richard Grenell, United States Ambassador to Germany mentioned about new sanctions, which Washington is planning to apply to companies related to construction of the gas pipeline. On 26 May the American diplomat in the interview published by the German daily Handelsblatt told that such sanctions may be approved in the nearest future.
We almost have no doubts that the USA will actually accomplish its intensions. Previous samples show that Washington much efficiently than Europeans have been fighting against ‘Nordstream-2’ and that sanctions imposed by it are more efficient than all other. Why is it? German radio station Deutsche Welle indicated minimum three reasons of such an approach of the United States.
Firstly, contrary to Germany or Austria, the USA sees ‘Nordstream-2’ not as an economical, but a political project, the goal of which is to increase influence of Russia over Europe. Washington cannot afford this: it is not by chance that the already mentioned United States Ambassador in Germany R. Grenell encouraged Berlin to reconsider the policy with regards to Russia and ‘stop feeding the beast’. Washington is convinced that Moscow will dedicate billions of Euros earned from sale of gas to its destabilizing foreign policy.      
The second goal of the USA that was declared in public is to support American partners in Europe. As R. Grenell told before, ‘Nordstream-2’ is like an attempt to increase energy pressure on Europe and the President Donald Trump criticized Germany several times that he latter was expecting the United States to protect it from Russia, however at the same time it is making billion value oil and gas supply contracts with Moscow and thus is becoming a hostage of Russia.     
And finally we have the third reason why the USA is resisting the project of Russia. Already by previous sanctions Washington prevented plans of Moscow from transit of Russian gas through Ukraine and tried to make it postpone the start of putting it into operation. The gas pipeline had to start operating in December 2019. Right at that time 10-year contract for supply of Russian gas to Europe via pipes in Ukraine that was in effect, had to expire. Having failed to finish ‘Nord Stream-2’ Moscow had no other option just agree with Kiev in regards to extension of the contract for another 5 years.           
Russia is not eager to talk about any of the mentioned motives of Washington to resist gas pipelines and sees only attempts of Americans to protect its own gas export to Europe only. According to Moscow, the USA is taking such drastic measures just because its gas is not competitive in Europe. However, considering the constant growing needs for liquefied natural gas, including American, this is not true.
What new sanctions of the USA against the Russian project might be are still not known. The already mentioned daily Handelsblatt suspects that companies that provide services to gas pipelines or enterprises that will receive gas from Russian might be imposed sanctions. The concern  still feels optimistic: during the telephone conference held on 26 May heads of the gas giant confirmed that they expect to finish the project by the end of this year.  Given that the last one hundred kilometres of the pipeline will be constructed by Russians only with the use of its own manpower, such scenario is probable. However, whether the constructed gas pipeline will be put into operation actually will depend on the position Washington will take.  
Aras Lukšas

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