The group building the Nord Stream 2 pipeline to import Russian gas into Germany is exploring plans to hive off its last 50km into a separate company, a move that would undermine EU plans to regulate the entire $9.5bn project. Under the proposal, a new company would own and manage the small part of the undersea pipeline within German territorial waters. While this section would be subject to EU rules, the rest of Nord Stream 2 – nearly 1,200km through the Baltic Sea – would remain outside the bloc’s jurisdiction, according to three people familiar with the plans.
The plan, while in its early stages, could stoke further criticism of Nord Stream 2, owned by Russia’s Gazprom, which some central and eastern European member states charge is counter to EU efforts to diversify its energy sources. The US has threatened sanctions against the project and criticized Germany for its strong support for the pipeline. Governments on both sides of the Atlantic worry that Moscow could use the pipeline to reduce gas shipments through Ukraine and deny Kiev an important source of revenue.
The corporate structure being considered for Nord Stream 2 would substantially undermine an EU decision last month that the complete project be subject to the EU’s energy rules. Applying EU rules – including measures insisting on non-discriminatory tariffs and access for third parties was expected to change the project’s economics. If the rules are limited to the portion of the pipeline in German waters, this impact would be limited. “This will move the debate from a legal or technical one into a purely political discussion,” said a senior European diplomat briefed on the proposal.
Germany and Gazprom maintain that Nord Stream 2 is a purely economic project needed to replace Europe’s declining gas supplies. Moscow contends that US hostility to the project is motivated by a desire to hurt Russian business interests and support exports of American LNG into Europe.